Annual Report • Mar 28, 2017
Annual Report
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Revenue rose 3 per cent to SEK 5,937 M (5,761). EBIT amounted to SEK 481 M (616) and the EBIT margin amounted to 8 per cent (11).
We are the car owner's first choice and strive for a simpler and more affordable car life.
For 2017, I am confident of the possibilities of strengthening our position and regaining market shares in all of our markets.
Our business model comprises the whole chain from purchasing and stock-keeping of spare parts and accessories to B2B and B2C sales.
Mekonomen Group's overall goal is to develop with high profitability and thereby generate value growth for shareholders.
The development of the Nordic aftermarket for car parts and workshop services is growing at a stable rate of 1–2 per cent per year.
We are convinced that the combination of differentiated concepts and brands towards selected target groups and a strong central purchasing function generates growth.
Mekonomen Group comprises the Group companies MECA Scandinavia, Mekonomen Sweden, Mekonomen Norway and Sørensen og Balchen.
We have to take responsibility and be at the forefront with regard to sustainability in our industry.
Mekonomen's share is listed on Nasdaq Stockholm, in the Mid Cap segment and is traded under the MEKO ticker.
Pehr Oscarson takes office as the President and CEO on 1 March 2017 after having been the acting President and CEO since October 2016.
| Administration Report . | 33 |
|---|---|
| • Proposed appropriation of earnings 38 | |
| • Corporate Governance Report . | 39 |
| • Board of Directors . | 46 |
| • Group Management 47 | |
| Financial statements . | 48 |
| • Consolidated income statement 48 | |
| • Consolidated statement | |
| of comprehensive income 48 | |
| • Consolidated balance sheet 49 | |
| • Consolidated statement of changes in equity | 51 |
| • Consolidated cash flow statement 52 | |
| • Income statement for the Parent Company 53 | |
| • Statement of comprehensive income | |
| for the Parent Company . | 53 |
| • Balance sheet for the Parent Company 54 | |
| • Statement of changes in shareholders' equity | |
| for the Parent Company . | 56 |
| • Cash flow statement for the Parent Company . | 57 |
| Notes . | 58 |
| Signatures 82 | |
| Auditor's Report 83 | |
| Five-year summary . | 86 |
| Quarterly overview 88 | |
| Glossary, definitions and alternative | |
| performance measures . | 89 |
| Addresses 90 |
Mekonomen Group's formal Annual Report comprises pages 33–85. Only the original version of the formal Annual Report has been reviewed by the company's auditors. The Annual Report is published in Swedish and English. The Swedish version represents the original version, and has been translated into English.
Feel free to visit our website at www.mekonomen.com.
| Key figures1) | 2016 | 2015 | 2014 |
|---|---|---|---|
| Revenue, SEK M | 5,937 | 5,761 | 5,390 |
| EBITA, SEK M | 594 | 726 | 763 |
| EBIT, SEK M | 481 | 616 | 639 |
| Profit for the year, SEK M | 342 | 430 | 466 |
| Earnings per share, SEK | 9.32 | 11.77 | 12.80 |
| EBITA margin, % | 10 | 13 | 14 |
| EBIT margin, % | 8 | 11 | 12 |
| Cash flow per share, SEK2) | 15.1 | 12.2 | 11.5 |
| Dividend per share, SEK3) | 7.00 | 7.00 | 7.00 |
| Return on shareholders' equity, % | 15 | 20 | 21 |
| Equity/assets ratio, % | 43 | 40 | 39 |
| Net debt/EBITDA, multiple | 2.19 | 2.07 | 3.09 |
1) All amounts and key figures refer to the continuing operations except cash flow, equity/assets ratio and net debt/EBITDA.
2) From operating activities. 3) The Board's proposal for 2016.
1) For all years presented, discontinued store operations in Denmark have been excluded.
2) Net sales for MECA 2012 have been recalculated for 12 months.
Mekonomen Group makes car life simpler and more affordable for our customers. We do so through a broad and accessible range of affordable and innovative solutions and products for consumers and companies. We are the leading car service chain in the Nordic region with a proprietary wholesale operation, more than 340 stores and over 2,000 affiliated workshops operating under the Group's brands.
Our vision is to be the car owner's first choice and strive for a simpler and more affordable car life.
Mekonomen Group's business concept is to offer consumers and companies solutions for a simpler and more affordable car life by using clear and innovative concepts, high quality and an efficient logistics chain.
Net sales divided by segment
Net sales by customer group
Affiliated workshops – 38% Other workshops – 42% Consumers – 20%
Revenue 2016, SEK M
5,937
Number of employees in the Group
1) Proportion of spare part sales to workshops.
Number of affiliated workshops
2,021 342 Market share1)
Sweden
15%
Number of stores
Market share1) Norway
25%
Number of stores 1 Number of affiliated workshops 0 Number of employees 4
Number of stores 6 Number of affiliated workshops 23 Number of employees 24
Number of stores 141 Number of affiliated workshops 973 Number of employees 810
At year-end, there were a total of 2,290 employees, of whom 13 were employed outside the Nordic region.
Number of stores 194 Number of affiliated workshops 1,025 Number of employees 1,439
We make car life simpler than 15,000 car models. Read more about our wholesale operations on page 7.
All new supplier agreements of spare parts include a clause on compliance to the UN Global Compact's principles. Today, suppliers that account for more than 91 per cent of our purchases have signed our clause or presented their own corresponding policy. Read more about our sustainability work on pages 20–29.
SUSTAINABLE BUSINESS
I can confirm that 2016 was one of the most challenging years ever for Mekonomen Group. For 2017, I am confident of the possibilities of strengthening our position and regaining market shares in all of our markets.
In 2016, Mekonomen Group was affected by the negative development in Mekonomen Sweden, which was largely due to the implementation of a new retail store system and the reorganisation introduced at the end of 2015. The initial problems with the store data system have been managed and the system will contribute positively to profitability in the future. In the autumn, we initiated a cost-saving programme and reintroduced a more decentralised organisation focused on business acumen to break the trend in Mekonomen Sweden.
Our Danish operations, which were unprofitable for us for many years, were divested at the end of the year and as of 2017, we will no longer be burdened by losses from these operations.
I'm struck every day by how strong the innovativeness is in our Group. This innovative capacity is one of our absolutely most valuable assets. We are active in a market undergoing rapid change, with continuous new products, new business models and extremely tough competition. This is why the ability to think in new ways is absolutely crucial to success and to defending and strengthening our market position. For example, during the year, we launched private leasing, the Yehlove workshop concept and the price direct booking concept and continued to develop the Lasingoo comparison service launched in 2014.
It is also pleasing that, with the Mekonomen brand, we are defending the position as the strongest brand name in the industry at the Swedish Brand Awards 2016, which analyses the customers' ratings in combination with brand awareness.
In 2016, we also took several important steps in the work of building the new automated central warehouse in Strängnäs, which is estimated to provide savings of SEK 50 M per year beginning in 2020 and will be common to Mekonomen and MECA.
Prior experience:
Senior positions in MECA since 2001 and before that the President of SweCar AB. Number of shares: 2,000.
As a leading player in the industry, we have a responsibility for ensuring that our business is sustainable. The largest challenge for our industry is the shortage of skilled mechanics. In 2016, we worked to create an upper-secondary educational programme for mechanics. We have now achieved the goal and the first students will begin in autumn 2017. The shortage of skilled mechanics is also one of the driving forces for why we launched services in 2016 for both recruitment and staffing, which make the day-to-day easier for our workshops.
One of our largest strengths is our ability to adapt our business model to new trends in the market. One example is the workshop we opened in Norway in 2016, which is fully focused on electric cars. A growing electric car fleet has been portrayed by some industry analysts as a threat to our industry since electric cars use fewer wearing parts than cars with combustion engines. However, of course, electric cars also need service and it is therefore natural for us to become a major player in the market in this area as well. More electric cars are also good for the environment. Mekonomen strives to run the business in a sustainable manner and we will of course continue to comply with the UN Global Compact's principles.
Further improving our offer to the workshops is at the top of my to-do list. We will do everything we can to enable them to work efficiently and provide a high level
"I'M STRUCK EVERY DAY BY HOW STRONG THE INNOVATIVENESS IS IN OUR GROUP. THIS INNOVATIVE CAPACITY IS ONE OF OUR ABSOLUTELY MOST VALUABLE ASSETS."
Pehr Oscarson took office as the President and CEO on 1 March 2017 after having been the acting President and CEO since October 2016.
of quality to the end customers through, for example, easier administration and flows so that they can devote more of their time to the customers. As a part of this, the price direct service was launched in 2016. It saves a significant amount of time for the workshops, time that they can instead devote to their core business – servicing cars.
In 2017, our new catalogue, or e-commerce solution, will also be launched. It will be a more user friendly solution and will enhance the efficiency of the work both in the Group and for our workshop customers. It is another example of how we focus on making the day-to-day easier for the workshops.
For me as CEO, it is important to develop the leadership in the entire Mekonomen Group. This does not mean that we should have more managers, rather the contrary. We have shortened the distance between workshops and Group Management, which I believe is important. We have also begun the work of strengthening the professionalism in our whole organisation.
I began by confirming that 2016 was a turbulent year and it has placed great demands on our employees. I am very proud and impressed when I see how people throughout every part of the Group roll up their sleeves and work extra hard even when conditions are tough. My ambition and conviction is that the upcoming year will be characterised by more stability, profitability and even clearer results of the hard work being done every day.
Pehr Oscarson, President and CEO
Mekonomen Group works on the aftermarket for cars, light trucks and heavy vehicles. Our business model comprises the whole chain from purchasing and stock-keeping of spare parts and accessories to B2B and B2C sales. We create value for our customers and owners through meticulous purchases in large volumes combined with an efficient wholesale operation, well-known stores and workshops with well-trained personnel.
We set requirements on our suppliers in accordance with the car manufactors' instructions and specifications.
We place demands on documentation from the suppliers that ensure that the product matches original part quality.
By being a customer of major and recognised suppliers, we benefit from the strict environmental, health and safety and quality requirements already exercised by these players.
All new supplier agreements include a clause on compliance to the UN Global Compact's principles. Today, suppliers that account for more than 91 per cent of our purchases have signed our clause or presented their own corresponding policy.
In the development of our own brands, ProMeister for spare parts and Carwise for auto accessories, we ourselves assume a greater responsibility for the quality assurance of the products.
We conduct our own and independent tests of materials, function, durability and health and safety. Our own tests take place in our quality laboratory, Intermeko, in Poland, which we own together with the Polish car part company Intercars.
Through Intermeko, we have access to technicians and engineers who are fulltime employees.
Quality assurance also takes place through the follow-up of complaints, warranty claims and measurement of frequently returned items.
Purchasing takes place mainly from the large suppliers in Europe, which also deliver to the car manufactors. Around 20 per cent of our articles are purchased through direct imports from Asia.
The Group purchases around 75 per cent of the supply of products from 160 suppliers.
ProMeister stands for premium quality, which means that we choose suppliers with the highest level of quality that matches original part quality, in other words the parts that are in the car when it is new.
The ProMeister range includes more than 7,000 articles with an industry-unique five-year warranty.
1) The Board's proposal.
In 2016, the Group decided to centralise the central warehouse structure in Sweden.
The existing central warehouse in Strängnäs is being extended with an automated section. The transition to a common central warehouse will take place continuously until 2020.
At present, sourcing of spare parts and accessories takes place through the Group companies' respective central warehouses in Strängnäs, Eskilstuna and Oslo, which each stock between 60,000–70,000 articles for more than 15,000 car models.
In addition to this, we have regional warehouses in Luleå, Oslo and Helsinki to ensure efficient daily logistics throughout the Nordic region.
Our three store chains, MECA, Mekonomen and BilXtra receive several deliveries daily from our central warehouses and regional warehouses in the Nordic region.
There are 342 stores of which 261 are owned by the Group.
The workshops mainly buy spare parts online through the Group's digital product catalogues. Deliveries of spare parts to the workshops take place through the Group's network of stores.
The stores serve a network of affiliated concept workshops and other workshops, as well as consumers with spare parts and auto accessories through store sales and local distribution.
Digital sales through the spare parts catalogue account for the majority of our B2B sales. Consumer sales primarily take place through physical stores, but also through our growing e-commerce business.
Distribution and supply chain
Within the Group, there are five workshop chains under the brands MECA Car Service, Mekonomen Bilverkstad, BilXtra, Speedy and MekoPartner.
There are 2,021 affiliated workshops in the Group.
The workshops mainly buy spare parts online through the Group's digital product catalogues. Deliveries of spare parts to the workshops take place through the Group's network of stores.
In addition to sales to concept-affiliated workshops in the five workshop chains, Mekonomen Group also drives sales to other workshops, as well as companies and authorities, so-called fleet customers.
Our target group is everyone who owns or has access to a car.
We reach a larger share of all car owners by offering differentiated concepts in the Group with different offers.
Our customers should perceive us as affordable and innovative with a high quality and degree of customer service.
By a simpler car life, we mean that the customer will get help with all elements of his or her car regardless of whether it involves workshop services, purchases and installation of car accessories, borrowing a car, car washing or car leasing.
PROFIT FOR THE YEAR1): SEK 335 M
1) Profit for the year attributable to the Parent Company's shareholders.
Mekonomen Group's overall goal is to develop with high profitability and thereby generate value growth for the shareholders. For 2016, the Board of Directors decided on new financial targets for sales growth and operating margin, supplemented with a net debt/EBITDA target.
To achieve annual sales growth of at least 5 per cent, as a combination of organic and acquired growth.
In 2016, sales growth for the whole Group was 3 per cent (7). Growth was negatively impacted by the sales trend in Mekonomen Sweden during the year and by the weaker NOK mainly in the first half of the year. MECA, Mekonomen Norway and Sørensen og Balchen had good sales growth in local currency.
1) Adjusted goal as of 2016.
To annually achieve an operating margin in excess of 10 per cent.
5% >10% >40%
The equity/ assets ratio shall not in the long term be less than 40 per cent.
Operating margin for full-year 2016 was 8 per cent (11). The margin was negatively affected by the weak development in Mekonomen Sweden during the year, the losses in the Danish operations and non-recurring costs.
The equity/assets ratio amounted to 43 per cent at 31 December 2016 compared with 40 per cent at 31 December 2015.
In 2016, the decision was made to streamline our central warehouse structure by expanding our existing central warehouse in Strängnäs to a common automated central warehouse for MECA and Mekonomen in Sweden. The aim is to create a shared, flexible and cost-effective supply chain platform in the Group. Through this investment, our ambition is to create the industry's most efficient supply chain with an infrastructure that is optimal for our business.
Net debt/ EBITDA shall not in the long term exceed 2.0.
Net debt/EBITDA for full-year 2016 was 2.19 (2.07). EBITDA was negatively affected by the development in Mekonomen Sweden, the losses in the Danish operations and non-recurring costs. At the same time, net debt decreased during the year, mainly due to a positive cash flow from the operating activities.
The Board's intention is that Mekonomen Group will pay dividends corre-
sponding to not less than 50 per cent of profit after tax. When determining future dividends, consideration is primarily given to investment needs, but other factors deemed significant by the Board are also considered.
The Board proposes a dividend of SEK 7.00 (7.00) per share. The proposal corresponds to 75 per cent of the profit for the year.
Mekonomen Group's strategy is to simplify car life, quality assure the customer experience and utilise our economies of scale.
Our most important focus area is to support our affiliated concept workshops to jointly offer our existing and new customers added value, availability, affordability and provide solutions for the needs of the car owners.
1) New goal as of 2016.
The development of the Nordic aftermarket for car parts and workshop services is growing at a stable rate of 1–2 per cent per year. At the same time, the traditional structures and approaches are being challenged by on-going changes in society in form of new technology in the cars, increased environmental awareness and new trends linked to how people want access to a car.
The aftermarket for car parts and workshop services in the Nordic region is growing slightly, but stable over time, even if short-term fluctuations occur. The primary drivers in the market for spare parts and workshop services is the number of cars driven out on the roads and the number of miles driven. Both the number of cars in traffic and the total number of miles driven have had a slightly increasing trend in recent years in Sweden and Norway. The fact that new car sales have been on a high level in recent years has not appreciably affected the aftermarket since the cars come in to the workshops in a small extent in the first years. It is when the cars become three or four years old that the need for service and repairs increases. In the future, we see a potential for a growing overall market in our main markets of Sweden and Norway in light of the high new car sales and a growing fleet of cars.
Another factor that affects the market is the improved sustainability of cars and spare parts. It extends the time between service intervals, but has thus far been counteracted by the cars being driven for more years and the price level of spare parts increasing in pace with their extended sustainability.
The market for car accessories is more sensitive to economic fluctuations and affected by the consumption willingness of private individuals. In 2016, household consumption increased by 2.5 per cent in Sweden according to SCB and by 1.6 per cent in Norway according to SSB.
The European market for spare car parts is growing by 1–2 per cent annually and in recent years, has been under consolidation. This is a trend that we expect to continue. The number of players is decreasing, at the same time that those who remain are larger and stronger. Players are being bought up or merging in order to gain synergy effects in the form of large purchasing volumes in combination with more efficient logistics solutions.
The consolidation in the industry leads to fewer, but larger players. The main objective is to achieve synergies in the form of purchasing volumes and more efficient logistics solutions.
The workshop market is undergoing change and it is becoming increasingly important for small and medium-sized workshops to belong to a chain. The requirements are increasing on the workshops to be able to adapt to the need for higher technical expertise and new equipment required by today's cars. Larger players and chains have greater opportunities to invest in relevant continued training and advanced equipment needed.
The differences between branded and independent players that previously existed are decreasing in significance. We are active on the same market, but with different pricing and marketing of our products and services. Customers choose the workshop they trust, with a price level they consider affordable. This development contributes to more affordable services and products, which in turn benefit the car owner.
Increase in Nordic market for car parts and workshop services, annually
Increase in number of cars in traffic in Sweden 20161)
Increase in number of cars in traffic in Norway 20162)
1.8%
Even if the Nordic market for car parts and car service is more mature than many other markets, our business is affected by trends in our surroundings. Having a wellfounded understanding of these changes is important for us. Our ability to adapt to new opportunities and challenges is crucial to how competitive we will be when it comes to meeting new needs and behaviors among our customers in the future.
A growing number of people are choosing to not own a car, but instead using private leasing, joining a carpool or otherwise owning the car jointly to meet their transport needs. They want to have access to a car, but do not need to own it. Today so-called "car sharing" exists, although on a small scale, in major cities where there are less need and possibility of owning a car.
For Mekonomen Group, this trend creates new business opportunities. In 2016, we introduced the services Mekonomen car share and Mekonomen car leasing to simplify car life even for customers who do not own a car. These initiatives have been launched on a small scale to be developed in pace with the customers' needs and demands.
1) Source: Trafikanalys. 2) Source: OFV.
Online services play an increasingly important role for consumers, companies and society, even in the car industry. The market for the connected car is increasing rapidly and, by 2020, a quarter of a billion cars worldwide will be connected to the internet according to analyst firm Gartner. Older cars can be connected by installing a hardware that enables communication with the car. Wireless telematics simplify the car owner's day-to-day by enabling everything from turning on the heat in the car by mobile to getting information on the traffic situation. The workshop can read off the car's condition and update vehicle settings remotely or inform the car owner if something is in the midst of breaking down and suggest a visit instead of the car owner be standing at the roadside with a broken car. There are extensive benefits for society in the form of greater traffic safety.
Large investments are needed by traditional car manufactors, as well as software companies to develop self-driving cars or autonomous vehicles as they are also known. The growth is taking place gradually and we have already become accustomed to various kinds of driver assistance and automated systems, such as cruise control, assisted parking and automatic stopping. Increasingly intelligent systems for driver assistance are under development, but a lot of work remains to be done before fully self-driving vehicles become a part of our daily lives. Among other things, the automatic tech-
nology must be further refined, infrastructure adapted and regulatory frameworks developed.
There is great potential in digitisation for those who are innovative and adapt to new needs and behaviours among customers. The EU has an important role to play in ensuring free competition in the digital area so that the major car manufactors do not lock in new technology in their own brands and make it unavailable to other players in the aftermarket. That would not only inhibit free competition, but also technical development.
As the leading independent player in the Nordic market for car service, the ambition for Mekonomen Group is to lead the development in the industry. In spring 2017, together with the telecom company Telenor and partners in the Nordic Car Connect Forum, we will develop a mobile app and launch a solution for connected cars.
cars worldwide will be connected in 2020
Greater environmental awareness, more stringent emission requirements and government subsidies to those who drive environmentally friendly cars contribute to increased demand for electric cars, hybrids and cars driven on alternative fuels. Even if the number of newly registered electric cars broke records in 2016, the percentage of electric cars of the total car fleet is still small. In Sweden, the number of fully electric powered cars increased by 58 per cent to around 7,500 in 2016, according to Statistics Sweden, which corresponds to 0.2 per cent of the total number of registered cars. In Sweden, electric/plug-in hybrids are more common than pure electric cars. Norway is the country in the world with the highest percentage of electric cars, which is largely due to generous subsidies for electric car buyers. For example, they avoid paying VAT and import fees, are offered free parking and car tolls and may drive the car in the bus lanes. In Norway, the number of registered cars powered entirely by electricity surpassed 100,000 at the end of
2016, which corresponds to just below 4 per cent of the whole car fleet. The electric and hybrid cars are not alone in the market for cars run on alternative fuels. Cars run on biogas already exist today and the hydrogen car is being tested on a small scale is another environmentally friendly alternative that can gain ground in the future.
A larger percentage of electric cars means that the need for some components and services will decrease, such as the need for fuel systems and gear boxes, and the replacement of spark plugs and cam belts. The reduced need for a number of components will be compensated to some extent by greater demand for new components that are in an electric car, such as batteries and battery packs. Hybrid cars consist of the same components as a car with a combustion engine and the additional components that an electric car requires.
Although electric cars and hybrid cars still account for a small part of the total car fleet, we in Mekonomen Group are preparing for the greater need for their service and repair. In autumn 2016, we opened our first electric car workshop located outside Oslo, Norway, an area where the percentage of electric cars is high. Through our own training at ProMeister Academy, we are also preparing mechanics in a number of our affiliated workshops with relevant training.
The number of electric cars in Norway, the world's most electric-car-dense country
E-commerce is developing strongly and has become a given when consumers in the Nordic region want to buy products or order services. However, until now, the possibility for car owners to compare prices, times and order workshop appointments online has not been as simple and obvious. B2C sales of spare parts currently account for a small part of the overall market and mainly attract "do-it-yourselfers" among consumers. B2B sales
to workshops and other corporate customers have long taken place mainly by e-commerce. In the future, e-commerce will become more important for the industry and more advanced platforms will be necessary to meet the customers' needs and wishes.
For Mekonomen Group, it is important to be involved and lead the development. In 2014, together with the large independent workshop chains in Sweden, we introduced Lasingoo.se, a digital comparison portal for workshop and car inspection services online. The service has since also been introduced in Norway. In autumn 2016, we launched the service price direct in Sweden under the Mekonomen brand. There, customers can get access to available times and book workshop services online. Both of the solutions contribute to greater transparency and an easier booking procedure for the car owners. In our B2B operations, we are already a leading e-commerce player in spare parts and accessories, where the majority of the spare parts orders are made through our internet-based catalogues. In 2017, we will launch the next generation e-commerce platform and spare parts catalogue that offers new opportunities of greater customer loyalty and values in both B2B and B2C. The solution will thereby also replace our current e-commerce solutions to consumers.
The service price direct was launched by Mekonomen
2016
As the auto industry grows, vehicles are becoming more technically advanced and many mechanics are approaching retirement age, there is a need to hire upwards of 5,000 new mechanics in the industry. At the same time, interest in the upper-secondary automotive programme has decreased and further education of the students is required in electronics after graduation so they will be able to get relevant knowledge that matches today's needs among the workshops. There is an extensive need to modernise vocational training for mechanics to meet the skills requirements in today's workshops.
For Mekonomen Group, we see a need to recruit 500 new mechanics in the next few years. The need for mechanics with relevant expertise is a focus area for us and we have taken a number of initiatives to increase the supply. Our training centre, ProMeister Academy, continuously ensures quality and expertise among our mechanics. In the autumn, we are beginning an upper-secondary school programme together with the educational player Lärande i Sverige to improve the quality of the mechanic programme; see more information on pages 16 and 23. To utilise the expertise among the newly arrived with a mechanic background, we cooperate with the Public Employment Service. In 2016, a staffing operation was established with the aim of covering temporary needs for mechanics in our workshops.
The number of mechanics Mekonomen Group needs to recruit
500
We are convinced that the combination of differentiated concepts and brands towards selected target groups and a strong central purchasing function generates growth.
"I LIKE TO FIDDLE WITH MY CAR AND ENJOY DISCUSSING THE SOLUTION FOR FIXING MY CAR."
MECA customer
Mekonomen customer
Mekonomen Group has three workshop and store chains: MECA, Mekonomen and Sørensen og Balchen (operated under the brand name BilXtra), and two workshop chains: MekoPartner and Speedy. The chains are largely active in the same geographic markets, but with different concepts, offers and solutions to meet the needs of different target groups.
In 2016, the Group focused on further positioning the respective brands to the right main target group and offering security in the service transaction through skills development via the Group's training centre ProMeister Academy. Major focus has also been on following up and improving the customer experience throughout the value chain.
To be even more affordable and competitive in relation to our competitors, we have developed our own product range – ProMeister for spare parts and Carwise for accessories.
Before an OBP product is brought into the assortment, stringent quality tests are done based on the parameters materials, durability and function. Among other things, the products are tested in our own test lab in Poland – Intermeko – where we have full-time engineers and technicians who continuously ensure that our spare parts match original part quality. Read more about our quality assurance work under the sustainability section on page 24.
The ProMeister range comprises more than 7,000 parts and accounts for 14 per cent of Mekonomen Group's total spare parts sales. The price of the spare parts is on average 15 per cent below the price of the corresponding brand-name product in the Group's assortment and substantially lower than at the brand-dependent workshops. ProMeister is available in all workshop and store chains in Mekonomen Group and it is the only spare parts brand on the market that offers a five-year warranty.
"DROP-IN TIMES
Speedy customer
AND FAST HELP ARE
IMPORTANT TO ME."
The subsidiary Opus Equipment sells workshop equipment and tools and offers services to Mekonomen Group's concept workshops, as well as other workshops in the industry.
We make car life simpler Mekonomen won the award for the strongest brand at the Swedish Brand Awards 2016 for the third
MekoPartner customer
"THE CAR IS OUR INTEREST. IF WE NEED TO SERVE THE CAR OR STYLE THE CAR WITH ACCESSORIES, EVERYTHING IS UNDER ONE ROOF."
Two BilXtra customers
The operations supplement the Group's core business and entails a complete offering to our affiliated concept workshops. Opus Equipment's operations were acquired in 2015 with operations in Sweden and in 2016 also began operations in Norway.
Lasingoo.se is a digital portal for workshop and car inspection services where car owners can compare prices, provide and read ratings, and book at a fixed price and time directly on the screen. The cooperation around Lasingoo. se was initiated in 2014 together with the large independent workshop chains in Sweden. At the end of 2015, Lasingoo was also launched in Norway. Today, car owners can search among more than 2,000 workshops in Sweden and 1,000 workshops in Norway. In autumn 2016, Mekonomen Group launched the service price direct under the Mekonomen brand name in Sweden. With price direct, Mekonomen's customers can book workshop services online over mekonomen.se with a price and overview of available times directly.
Both of the solutions contribute to greater transparency and an easier booking procedure for the car owners. Mekonomen's workshop services will also continue to be able to be booked over Lasingoo.se for those who want to compare Mekonomen with the other players in the industry. The workshop services can also be booked over Mekonomen.se for car owners who are Mekonomen customers and want to be able to easily book their workshop services.
In ProMeister Solutions, Mekonomen Group has gathered all services to our affiliated workshops, such as business systems, technical support, skills development, staffing and recruitment of mechanics.
ProMeister Solutions is a part of Mekonomen Group as the company in which we have gathered all of the workshop offerings in our B2B operations. By developing the workshop offering in one place in the Group, we are developing one solution instead of three and making use of all expertise and the internal best practices in an efficient manner.
Every month, the team in technical support receives 4,500 cases from Mekonomen Group's workshops. The technical solutions are made available and searchable to all workshops in the Group.
ProMeister Academy is the Group's own training centre that secures the quality and skills of our mechanics in all of the Group's workshop chains. Skills development is offered in new technologies, customer service and professionalism. In 2016, the interest in hybrid car training grew strongly. Since the end of 2016, we also offer electric car training to meet the trend of more electric powered cars in the Nordic region in the future. Since ProMeister Academy was founded in 2013, the number of training days for mechanics have increased by 15 per cent.
The number of mechanics graduating from Swedish upper-secondary schools is too low in relation to the industry's needs. In Mekonomen Group, we see a need for 500 technically knowledgeable mechanics. Only one of five students graduating from traditional mechanic programmes has the knowledge required to learn the profession and work in a modern auto workshop. In autumn 2017, Mekonomen Group will be starting an upper-secondary school programme together with the educational player Lärande i Sverige to improve the quality of education and contribute to making the mechanic profession attractive to young people facing a career choice.
To find mechanics for our workshops on the short term, we have improved our validation tests to quickly identify existing skills in a mechanic. We offer support in the recruitment process and collaborate with the Public Employment Service to recruit recently arrived residents of Sweden with a mechanic background. In 2016, a staffing and recruitment operation was established with the aim of covering temporary and long-term needs for mechanics in our workshops.
In Mekonomen Group, we currently see a need for 500 technically knowledgeable mechanics. The whole industry needs 5,000 mechanics.
Mekonomen Group's need for mechanics
500
Number of cases to technical support per month
4,500
Rising proportion of courses in ProMeister Academy
15%
Number of mechanics in our affiliated workshops
8,000
We ask Petra Bendelin, President of ProMeister Solutions, three quick questions on the challenges faced by the workshops.
Petra Bendelin has been the President of ProMeister Solutions Since 2015.
Through our training centre ProMeister Academy, we offer physical and digital courses in the areas where mechanics need to update their knowledge. We have also developed validation tests that show how a mechanic stacks up in the areas of Petrol, Diesel, Gas cars, Tyres/ Wheels, Hybrid/Electric, Vehicle electronics, Brakes, Climate systems and Drive trains. Based on the results, it becomes easier for the workshop manager to know which courses are suitable for the respective mechanic.
Our services will create better profitability and efficiency for our workshops. We have developed services that provide the workshop administrative relief so that the workshop can focus on the customers and increase capacity and margins from day one. ProMeister's business system supports the customer recipient and handles bookings, orders and accounting. ProMeister Academy provides further training to auto mechanics in the latest technology and offers technical support. We offer recruitment and staffing support for the right expertise in the workshop and offer a service car that fills all of the consumables stock, everything so the workshop can better serve its customers and their cars!
Returning customers are important to create a longterm sustainable business for the workshop. A satisfied customer also recommends the workshop to others, which makes the customer a valuable marketing channel. Customer loyalty is also created through the whole offering besides traditional workshop services, such as car insurance, car washing and car glass – a simpler car life.
Mekonomen Group comprises the Group companies MECA Scandinavia, Mekonomen Sweden, Mekonomen Norway and Sørensen og Balchen. The companies cooperate in purchasing and logistics. There is full competition in the market, however. Our strong brands have differentiated concepts, target groups and individual development focus.
MECA Scandinavia's operations are based on an efficient distribution network through 85 divisions to professional auto workshops. Logistics are controlled from the central warehouse in Eskilstuna where more than 60,000 articles are stocked. Under MECA, the business areas of heavy vehicles, ProMeister Solutions and Opus Equipment are operated, which work for the whole Mekonomen Group.
MECA has a clear B2B focus and caters mainly to the auto workshops as a business partner. Among the workshop customers, sales are made especially to the own workshop concept MECA Car Service and the partner workshop chain Bosch Car Service. The company also sells directly to companies and organisations, so-called fleet customers, and has been successful in terms of taking market shares in the public sector. In addition to this, there is a broad base of other B2B customers, including sales to petrol stations and convenience stores. The target group among car owners is mainly people interested in cars and knowledge around cars.
During the year, MECA established the heavy vehicles business area for Mekonomen Group. In addition to spare parts for cars and light trucks, the Group now also offers spare parts for vehicles over 3 tonnes. This effort began with a framework agreement with Nobina regarding deliveries of batteries to the public transport operator's vehicle fleet and depots in Sweden, Norway, Denmark and Finland.
The remaining Danish operations were divested in December 2016 to the Danish company T. Hansen Gruppen/AD Danmark. Besides stock, staff and rental agreements, the divestment also included T. Hansen Gruppen/AD Danmark being given the right to use the Mekonomen brand in Denmark and operate the workshop chains Mekonomen Autoteknik and MekoPartner.
The main operations in Mekonomen are conducted within the Group companies Mekonomen Sweden and Mekonomen Norway. Through nationwide store and workshop networks, Mekonomen has the best availability in the industry with a total of 184 stores and 1,029 affiliated workshops under the brands Mekonomen Bilverkstad and MekoPartner. The central warehouse in Strängnäs is responsible for logistics and stocks more than 70,000 items.
Mekonomen caters to both B2B and B2C customers. The largest B2B customers are Mekonomen Bilverkstad, MekoPartner and other workshops. Sales to consumers (B2C) take place through Mekonomen's stores and online. Mekonomen is a strong brand both among consumers and corporate customers, so-called fleet customers. The target group among car owners comprises families and those seeking simple solutions.
In 2016, it was decided to centralise the warehouse structure in Mekonomen Group through a renovation of Mekonomen's central warehouse in Strängnäs. The central warehouse will become largely automated and is estimated to provide savings effects of SEK 50 M per year beginning in 2020.
The lower earnings mainly in Mekonomen Sweden resulted in an action programme with savings of SEK 25 M annually beginning in 2017. The program was then extended
by further 20 million to cover a total of SEK 45 million with effect throughout the group.
In Mekonomen Sweden, a fleet agreement was signed with LKAB concerning delivery of spare parts to the mining company's operations.
For the third consecutive year, Mekonomen was named Sweden's strongest brand in our industry at the Swedish Brand Awards. The award is based on a survey of customer satisfaction and brand awareness.
Sørensen og Balchen conducts wholesale, store and workshop operations in Norway. The company is a leading distributor of spare car parts specialised in sales of car accessories in the industry. Sørensen og Balchen runs 72 stores and 255 affiliated workshops under the BilXtra brand in Norway. Logistics are managed in cooperation with the central purchasing department of Mekonomen Group, from the central warehouse in Oslo, which stocks more than 60,000 articles.
Sørensen og Balchen caters to both B2B and B2C customers. A large part of the sales are B2B, mainly to BilXtra workshops. Other sales are comprised of car accessories to consumers through the stores. The target group is mainly young men between 20–30 years old who like to personalise their cars using car accessories.
Sørensen og Balchen experienced strong sales growth to affiliated BilXtra workshops and also had strong sales growth in accessories, such as through the proprietary brand Carwise.
| OUR GROUP COMPANIES MECA Scandinavia – key figures 2016 and 2015 |
||
|---|---|---|
| 2016 | 20151) | |
| Net sales (external), SEK M | 2,039 | 1,871 |
| EBITA, SEK M3) | 217 | 258 |
| Operating profit (EBIT), SEK M3) | 205 | 245 |
| EBITA margin, %3) | 10 | 14 |
| Operating margin (EBIT margin), %3) | 10 | 13 |
| Number of stores/of which proprietary | 85/75 | 85/72 |
| Number of MECA Car Service workshops | 711 | 676 |
| Number of Mekonomen Bilverkstad workshops2) | – | 102 |
| Number of MekoPartner workshops2) | – | 39 |
| Average number of employees | 751 | 699 |
1) Excluding discontinued store operations in Denmark.
2) As of 28 December 2016, the workshops in Denmark are not included in the MECA segment as the Danish export operations were divested as of this date.
3) Including negative non-recurring items of SEK 25 M (3).
| 2016 | 2015 | |
|---|---|---|
| Net sales (external), SEK M | 1,891 | 1,925 |
| EBITA, SEK M | 190 | 289 |
| EBIT, SEK M | 187 | 287 |
| EBITA margin, % | 10 | 14 |
| EBIT margin, % | 10 | 14 |
| Number of stores/of which proprietary | 132/112 | 134/113 |
| Number of Mekonomen Service Centres | 427 | 439 |
| Number of MekoPartner Workshops | 127 | 125 |
| Average number of employees | 706 | 771 |
Mekonomen is the lead-
market leader in spare car parts in Sweden and Norway.
35%
MECA Scandinavia is a Share of the Group's net sales
| 2016 | 2015 | |
|---|---|---|
| Net sales (external), SEK M | 836 | 814 |
| EBITA, SEK M | 132 | 151 |
| EBIT, SEK M | 132 | 151 |
| EBITA margin, % | 15 | 18 |
| EBIT margin, % | 15 | 18 |
| Number of stores/of which proprietary | 45/32 | 45/32 |
| Number of Mekonomen Service Centres | 339 | 345 |
| Number of MekoPartner Workshops | 93 | 97 |
| Average number of employees | 263 | 261 |
Share of the Group's net sales
| 2016 | 2015 | |
|---|---|---|
| Net sales (external), SEK M | 725 | 729 |
| EBITA, SEK M | 117 | 117 |
| EBIT, SEK M | 117 | 116 |
| EBITA margin, % | 16 | 16 |
| EBIT margin, % | 16 | 16 |
| Number of stores/of which proprietary | 72/37 | 70/35 |
| Number of BilXtra workshops | 255 | 246 |
| Average number of employees | 257 | 273 |
Sørensen og Balchen conducts wholesale, store and workshop operations.
In 2015, a new sustainability strategy was developed that governs the Group's sustainability efforts until 2020. The focus areas have been prioritised based on the core values, code of conduct, business benefit and dialogue with the company's stakeholders.
Mekonomen Group's sustainability strategy is based on our materiality analysis where we have mapped internal and external stakeholders' views of what sustainability factors are the most important for Mekonomen Group. The work of analysing significant areas was begun in 2014 when Group Management, managers and employees in Mekonomen Group participated in an internal workshop. It was subsequently supplemented with an analysis, which shows the Group's work in relation to the United Nations Global Compact, of which the Mekonomen Group has been a participant with since 2013. This means that the Group commits to the UN Global Compact's ten principles in the areas of human rights, labour, the environment and anti-corruption. The materiality analysis was also put into a wider perspective, in which consideration was given to Mekonomen Group's business strategy and competitiveness, as well as national and international trends, standards, expectations, guidelines and laws that are relevant to a responsible and sustainable business. In 2017, the materiality analysis will be developed with a gap analysis to review our Sustainability Report in relation to the new legislation that entered into effect on 31 December 2016 that covers all large companies.
Our most important sustainability issues and priorities have been divided into seven focus areas: Customer Satisfaction, Product and Workshop Quality, Training, Managers and Employees, Diversity, Responsible Purchasing, and Transports and Energy Consumption. The areas that primarily concern our external stakeholders are Customer Satisfaction, Product and Workshop Quality, Responsible Purchasing and Transports and Energy Consumption. In that we have affiliated workshops, the area of Training also concerns external stakeholders. All areas concern our internal stakeholders and have an impact and are managed in the Group.
The sustainability work within Mekonomen Group is an integrated part of the operations as a part of the business benefit. The responsibility for the strategic sustainability work, as well as targets and follow-up rests with Group Management. The Board of Directors follows up the work in the Group Management's reporting. The operational work is driven by the manager or president of the respective business areas in collaboration with the managers for the environment and quality in the respective Group companies.
Mekonomen Group has been a signatory to the UN Global Compact since 2013.
The work on our focus areas takes place at different levels and scopes in the Group's companies. We have begun to coordinate the work in the sustainability area with strategies and targets for a common minimum level until 2020.
As an industry leader, our decisions and priorities have a direct impact on our employees and customers, but also on our industry as a whole and our surrounding world. Consequently, we have to take responsibility and be at the forefront with regard to sustainability in our industry.
Sustainability should be an integrated part of the business operations where the work to achieve set targets contributes to creating value for the company.
Our sustainability efforts should contribute to:
The Sustainability Report comprises all of Mekonomen Group's self-owned operations in the Nordic region and pertains to the 2016 financial year. The Sustainability Report was prepared according to the Global Reporting Initiative's (GRI) guidelines for sustainability reporting, with the G4 Core reporting alternative.
Mekonomen Group is a signatory to the UN Global Compact and the Sustainability Report 2016 also constitutes our Communication of Progress report to the UN Global Compact.
Mekonomen Group conducts continuous dialogues with customers, employees, owners and investors, suppliers and society. Dialogues and collaboration with societal actors take place with, for example, authorities (Public Employment Service and the Swedish National Agency for Education), organisations that work for diversity and integration (Mitt Liv, Mine, Stiftelsen En Frisk Generation, Glada Hudik-Teatern, Telge Tillväxt and Diversity Charter Sweden) and trade associations (SFVF – Swedish Association of Auto Repair Shops and MRF – Swedish Association for Motor Retail Trades and Repairs). They are our key stakeholders who directly or to a large extent are affected by the decisions and prioritisations we make as a company.
| Stakeholders | Dialogue format | Important issues | |
|---|---|---|---|
| Customers | • Continuous dialogue, customer service. • Consumer surveys. • Customer satisfaction surveys (NPS). • Newsletters, information on websites. • Social media. |
• High level of customer service. • Workshop quality. • Affordability. • Availability. |
|
| Employees | • Courses. | • Annual employee talks with continuous follow-up during the year. • Employee survey every two years. • Conferences. |
• Work environment, health and safety. • Leadership and development. • Terms of employment. • Impact and commitment. |
| Owners and analysts |
• Annual Report. • Interim reports. • Capital market days. • Roadshows and individual meetings. |
• Supplier inspections. • Transparency. • Governance. |
|
| Suppliers | • Continuous meetings during the pur chasing process. • Internal audits in factories that supply prod ucts in OBP – ProMeister spare parts. • Centrally procured purchasing agree ments with a requirement of signatures and compliance with the UN Global Compact's principles. |
• Signatures and compliance with the UN Global Compact's principles. • Product quality and safety. |
|
| Society | • Presentations at seminars and other meetings. • Collaboration with NGOs and authorities. |
• Diversity. • Skills and training. • Greater knowledge about our operations. |
Mekonomen Group works to offer a workplace with the possibility of skills development and career paths to attract and retain skilled managers and employees. In the Group, there is a distinct business culture where commitment and responsibility in our duties and the interaction with our customers form the basis of a successful development.
Our workplaces should reflect the diversity among our customer groups and society at large. By having employees and managers with varying experience and expertise, we improve the possibility of meeting the customers' needs. Diversity is also important in order to create renewal and change in our traditional industry. For us, diversity is about the value of differences among our employees when it comes to gender, ethnic background, age, education and experience. Mekonomen Group has an age distribution in which around 45 per cent of the employees are under the age of 35, about 32 per cent of the employees are between 35 and 50, and around 23 per cent of the employees are over 50. Creating an even gender distribution in our traditionally male industry is a major challenge for us. The proportion of women in Mekonomen Group is currently about 17 per cent. In order to get a more even distribution, we are working to introduce clearer processes in recruitment. Among other things, we strive to identify both male and female final candidates when filling positions. It is important to set an example at every level in the company, not least in the management groups. Our vision for 2020 is to have at least 35 per cent women in management positions.
We believe that conscientious and committed employees, who work in a sustainable work environment, create a high level of health attendance and good results. Sickness absence in the Group is 4 per cent in total.
Understanding of the company's values and strategy, and clear leadership creates a common direction and culture. In Mekonomen Group, we annually gather the company's management groups to go through strategy, discuss current challenges and collaborate over the Group's company boundaries. In conjunction with the management conference, the Mekonomen Group
The Antonia Ax:son Johnson prize for the Mechanic of the Year was awarded to Jörgen Oien, Meca Tech's AS in Norway in 2016.
Awards are held where we name the store, workshop, mechanic, employee and company of the year to support our culture. During the year, we also held training for our managers in the work environment to ensure that they can accept delegation of their work environment duties and work for a sound psychosocial and safe work environment.
The Antonia Ax:son Johnson prize for the Mechanic of the Year was awarded to Jörgen Oien, Meca Tech's AS in Norway in 2016.
Professionalism in the local operations is important to the Group's success. Our employees should be able to influence their work at the local workplace and create a balance between working life and leisure time. In addition to an annual employee talk, managers in Mekonomen Group are responsible for continuously conducting the dialogue in issues concerning the work environment, the work situation, skills development and career paths.
Through our training programmes, we want to ensure that our employees have the opportunity to continuous development in their current role or through new challenges in the Group. Internal recruitment is common both within and between companies in Mekonomen Group. Clear goals and feedback on results, both from the Group and our local managers, are important to ensure the employees are motivated. Long-term follow-up of the employees' views of us as a company is done every two years through an employee survey. The next survey will be done in autumn 2017.
Internally, business ethics are handled in employment contracts and in the Group's Code of Conduct. The Code of Conduct was approved by the Board and has been translated to every Nordic language as well as English. The Code of Conduct is reviewed annually. Upon updates, it is sent out to all employees by e-mail and posted on intranet platforms and externally on the website mekonomen.com. The Code of Conduct also provides information on the Group's whistle-blower function that was introduced in 2011. To further anchor business ethics and the company's operations among our employees, work was begun in 2016 to develop introduction training directed at new employees in the Group. Content that concerns the Code of Conduct, whistle-blowing and anti-corruption will also be compulsory for employees who already work in the Group.
Besides our employees, our long-term core business is dependent on us supporting our business partners, the workshops, in the recruitment of more mechanics with a high level of technical expertise. Modern car workshops need more mechanics who are more likely to be called automotive engineers rather than traditional auto mechanics. In Swedish upper-secondary schools, too few mechanics are graduating with enough expertise in relation to the actual needs in the industry. The shortage of expertise is due to a shortage of interest in the profession combined with the fact that traditional automotive programmes do not maintain an adequate level of quality in the training.
To find the 500 mechanics needed in Mekonomen Group, we have improved validation tests to quickly assess the existing skills of a mechanic. In the subsidiary ProMeister Solutions, we have begun the development of staffing and recruitment services to thereby support our workshops in their continued development. Through our training centre ProMeister Academy, we offer skills development in all areas of a modern auto workshop. We also cooperate with the Public Employment Service to recruit newly arrived residents of Sweden with technical or mechanical backgrounds.
We assume responsibility for our operating environment, shared resources and have confidence in the knowledge and ability of our employees. Our customers associate us with high quality.
We have a high level of expert knowledge within the areas in which we operate and this means that our customers perceive us as reliable and knowledgeable.
We place the customer first and satisfy our customers' expectations, which means that our customers understand that we have a comprehensive view.
We seek new ideas and continuously evolve to meet the needs of our existing and prospective customers. This means that our customers perceive us as innovative.
We generate strong financial results, with a balance between short and long-term earnings. We are perceived as affordable by the customer.
Number of employees
2290
Number of employees under the age of 35
Vision for the number of women in senior positions
Sickness absence in the Group
As a part of improving the attractiveness of the profession and improving the quality of the training, we will begin our own upper-secondary school programme for automotive engineers in the autumn semester of 2017 – the ProMeister programme. In 2016, together with the educational player Lärande i Sverige, which operates the Realgymnasiet upper-secondary school at several locations in Sweden, we developed the programme syllabus and began recruitment of future students in Stockholm and Lund. There is great interest in the ProMeister programme in both cities.
Mekonomen Group mainly purchases spare parts and accessories from the large European suppliers in the automotive industry. By being a customer of major and recognised suppliers, we benefit from the strict environmental, health and safety and quality requirements already exercised by these players.
Overview of Mekonomen Group's quality and safety work in the purchasing process
Purchases of spare parts take place from the same suppliers that supply the car makers.
We require documented original part quality from our suppliers. A spare part corresponding to the original part quality is of the same quality as the part that is in the car when it is new.
Purchases of our own product range, ProMeister for spare parts and Carwise for accessories, largely take place from the same European suppliers as the rest of the assortment. Around 20 per cent of our proprietary brand assortment are purchased through direct imports from Asia.
We are co-owners of Intermeko, a test lab where we have access to full-time technicians and engineers.
We conduct our own and independent quality tests of materials, design, function, durability and health and safety. Tests of spare parts also cover parameters such as rust proofing and density.
Quality assurance also takes place through the follow-up of complaints, warranty claims and measurement of frequently returned items.
The Group has agreements with a large number of suppliers that take care of deliveries of our more than 80,000 stocked articles.
To follow up the suppliers that constitute the greatest sustainability risk, a risk assessment process takes place with a division of suppliers into risk categories. Small and medium sized suppliers in Asia constitute the largest sustainability risk.
For the past three years, all new supplier agreements contain a clause on compliance to the principles of the UN Global Compact. The work of updating existing agreements is continuously under way.
Suppliers that account for more than 91 per cent of our purchases have signed our clause on compliance to the UN Global Compact or presented their own corresponding policy.
We are focusing on following up the suppliers deemed to constitute the greatest sustainability risk.
Internal audits concerning quality, health and safety, work environment, human rights and social conditions are done physically at the suppliers deemed to constitute the greatest sustainability risk before a purchase agreement is signed.
Internal audits take place via Mekonomen Group's purchasing office in Hong Kong through local employees and visiting employees from the purchasing department.
Although the risk is considered higher in certain markets and certain industries, corruption is not geographically limited. Mekonomen Group applies zero tolerance to corruption. Today, we make purchases from some markets where corruption is a well-known problem, which requires that we actively distance ourselves from these practices. Through a central purchasing organisation that secures all major purchasing agreements for our Group companies, we have better control over suppliers and the flow of products. Our supplier agreements contain clauses that include anti-corruption by referring to the United Nations Global Compact. In 2016, Mekonomen Group had no reported cases of corruption.
The Group's environmental impact in the Nordic region, through stores and affiliated workshops, mainly takes place in the areas of energy, transportation and the handling of chemicals. Our proprietary operations in MECA Sweden, MECA Norway and Mekonomen Sweden have come the farthest in the environmental efforts. Among other things, all of these facilities are ISO certified according to ISO 14001. In Mekonomen Sweden, all stores and a large number of workshops are also certified for occupational health and safety (OHSAS 18001) and quality management (ISO 9001). Certifications of the operations have entailed better control with clear processes to discover and manage deviations.
Since 2016, Mekonomen Group's Swedish companies are covered by the Act on Energy Audits in Large Companies. We have begun an audit of the operations according to a process from the Swedish Energy Agency with the aim of identifying steps to reduce energy consumption in the Group. This work mainly concerns Sweden, but will in the future be implemented in part or in whole in our Norwegian operations. The regulation is based on an EU directive for the Member States and means that an audit is to be conducted at least once every four years.
In 2016, Mekonomen Sweden initiated work to lower the energy consumption in proprietary operations through the introduction of eco-labelled electricity, measurement and follow-up. These measures resulted in energy consumption per store decreasing.
MECA Sweden has used eco-labelled electricity since 2015, which reduced the carbon dioxide emissions.
Measurement and follow-up of the Group's CO2 emissions have been initiated in the areas of business travel and company cars. In coming years, the impact from delivery transports from the central warehouse in Strängnäs and between our store and workshop network will be compiled for the entire Group.
The commenced centralisation of the warehouse structure will entail more efficient logistics for deliveries of spare parts and accessories throughout the Nordic region.
Introduction of ecolabelled energy is under way in the Group.
Our customer promises are based on our values. We put the customer first and focus on always meeting and exceeding our customers' expectations. The customers should associate us with high quality, affordability and innovation.
We want our customers to be our ambassadors and recommend us to others. In 2016, the customer evaluation tool, Net Promoter Score (NPS), was introduced for the workshop chains Mekonomen Bilverkstad and MECA Car Service. The method shows what percentage of the customers are ambassadors based on a scale that extends from minus 100 to plus 100.
Result for Mekonomen Bilverkstad: NPS value 53.47. Result for MECA Car Service: NPS value 57.00.
The most important dialogue with customers takes place in our stores and workshops. With the launch of the price direct service, the customers can themselves or via an employee at Mekonomen Sweden, directly book workshop services at a fixed price regardless of whether the customer is in a store, workshop, on the phone or at the computer.
We sell quality spare parts from the same suppliers that supply parts to the car makers. The parts match original part quality, which means that same spare part quality as what is in the car when it is new. We also offer an extensive network of stores with knowledgeable employees who can give you advice and help in your car life.
When you use one of our workshops, we guarantee the quality of the work done. The mechanics who work in our workshops continuously undergo skills development to be able to take care of your car. We are also affordable. You get the same high quality and stamp in your service book and retain the new car warranty, at a lower price than at a brand-dependent player.
Result for Mekonomen Bilverkstad. NPS value:
Result for MECA Car Service. NPS value:
57.00
Since 2010, Mekonomen Group has reported the sustainability work and corporate social responsibility as a part of the annual report. This year's Sustainability Report comprises the 2016 financial year and has been prepared according to the Global Reporting Initiative's G4 Core (GRI) guidelines for reporting sustainability information.
The Sustainability Report is presented as a part of Mekonomen Group's Annual Report 2016 and covers all of Mekonomen Group's proprietary operations in the Nordic region, including the Group companies MECA, Mekonomen Sweden, Mekonomen Norway and Sørensen og Balchen. In the cases that any part of the report only covers part of the Group, this is continuously indicated in the report. Affiliated workshops are not owned by the Group and are not covered in the report's presented key figures unless specifically stated in connection with the presented key figure.
Our GRI index presents the indicators chosen based on our significant issues and that we provide information on for 2016, and a cross reference to the principles in the UN Global Compact (UNGC). The GRI index also refers to information in the annual report for 2016. The sustainability information has not been audited by a third party. The most recent Sustainability Report was published on 21 March 2016.
| Description | Page | Comment/Reservation | UNGC principle | |
|---|---|---|---|---|
| Strategy and analysis | ||||
| G4-1 | Comment by the CEO | 4 | ||
| Organisation profile | ||||
| G4-3 | Organisation name | Mekonomen AB (publ) | ||
| G4-4 | Primary brands, products and services | 14–15 | ||
| G4-5 | Location of the organisation's headquarters | 90 | ||
| G4-6 | Countries where the Group operates | 3 | ||
| G4-7 | Ownership structure and corporate form | 39–47 | ||
| G4-8 | Markets served | 2–3 | ||
| G4-9 | Scale of the reporting organisation | 1–3 | ||
| G4-10 | Total number of employees | 2, 23 | ||
| G4-11 | Percentage of workforce covered by collective agreements | Over 97 per cent. | 3 | |
| G4-12 | Company's supply chain | 24 | ||
| G4-13 | Significant changes during the reporting period | 33–38 | No major changes have occurred | |
| G4-14 | Precautionary principle | 24, 25 | 7 | |
| G4-15 | External charters, principles and initiatives | 20 | ||
| G4-16 | Membership associations | The Group is part-owner and has Board members in Telge Tillväxt. The Group also has a Board position in the foundation En Frisk Generation, and is a member of the trade association SFVF. |
||
| Identified material aspects and boundaries | ||||
| G4-17 | Units included or excluded | 30–37 | ||
| G4-18 | Process to define the reports contents | 20–21 | ||
| G4-19 | Identified material aspects | 20–21 | ||
| G4-20 | Descriptions of material aspect boundaries within the organisation |
20-21 | ||
| G4-21 | Descriptions of material aspect boundaries outside the organisation |
20–21 | ||
| G4-22 | Effect of any restatements of information provided in previous reports |
No restatements have been made. | ||
| G4-23 | Significant changes in scope, delimitation or measurement methods compared to previous years' reports |
No changes have occurred. | ||
| Stakeholder engagement | ||||
| G4-24 | Stakeholder groups | 21 | ||
| G4-25 | Identification and selection of stakeholders | 21 | ||
| G4-26 | Approach to stakeholder engagement | 21 | ||
| G4-27 | Key topics raised during stakeholder engagements | 21 | ||
| Report profile | ||||
| G4-28 | Reporting period | 27 | ||
| G4-29 | Latest report | 27 | ||
| G4-30 | Reporting cycle | 27 | ||
| G4-31 | Contact person for the report | [email protected] | ||
| G4-32 | "In accordance" option, GRI Index and report assurance | 27 | ||
| G4-33 | Policy and current practice regarding report assurance | 27 | ||
| Governance | ||||
| G4-34 | Governance structure | 20, 39–47 | ||
| Ethics and integrity | ||||
| G4-56 | Values, principles, standards, code of conduct and ethical policy | 20–23 | 10 | |
| Material aspects | DMA and indicators |
Description | Page | Comment/Reservation | Focus areas in Mekonomen's materiality analysis |
UNGC principle |
|---|---|---|---|---|---|---|
| Environmental | ||||||
| Energy | G4-DMA | Management approach of material aspects | 20, 25 | 7, 8 | ||
| G4-EN3 | Direct and indirect energy consumption per primary energy source |
25 | Transports and energy consumption |
7, 8 | ||
| Transportation | G4-DMA | Management approach of material aspects | 20, 25 | 8 | ||
| G4-EN30 | Environmental impact from transports and travel |
25 | Transports and energy consumption |
8 | ||
| Supplier environmental assessment |
G4-DMA | Management approach of material aspects | 20, 24 | 8 | ||
| G4-EN32 | Percentage of new suppliers that were screened using environmental criteria |
24 | Responsible purchasing | 8 | ||
| Social | ||||||
| Employment | G4-DMA | Management approach of material aspects | 20 | 6 | ||
| G4-LA1 | Total number of employees and personnel turnover, by age group, gender and region |
22–23 | The Group lacks complete data. |
Managers and employees Diversity |
6 | |
| Work environment, health and safety |
G4-DMA | Management approach of material aspects | 20, 22–23 |
|||
| G4-LA6 | Rates of injury, occupational disease, lost days, absenteeism, and work-related fatalities per region |
22 | The Group lacks complete data. |
Managers and employees | ||
| Training and education | G4-DMA | Management approach of material aspects | 16, 20, 22–23 |
6 | ||
| G4-LA9 | Average number of training and education hours per employee and year, divided by personnel categories |
16 | The Group lacks complete data. |
Managers and employees Training |
6 | |
| Equality and diversity | G4-DMA | Management approach of material aspects | 20, 22–23 |
6 | ||
| G4-LA12 | Composition of the board, management and employees broken down by indicators of diversity |
22, 46–47 |
The Group lacks complete data. |
Managers and employees Diversity |
6 | |
| Supplier assessment for labor practices |
G4-DMA | Management approach of material aspects | 20, 24 | |||
| G4 LA14 | Percentage of new suppliers that were screened using labor practices criteria |
24 | Responsible purchasing | |||
| Human rights | ||||||
| Non-discrimination | G4-DMA | Management approach of material aspects | 20, 22–33 |
6 | ||
| G4-HR3 | Total number of incidents of discrimination and corrective actions taken |
No cases of discrimination were reported in 2016 |
Diversity | 6 | ||
| Supplier human rights assessment |
G4-DMA | Management approach of material aspects | 20, 24 | 2 | ||
| G4-HR10 | Percentage of new suppliers that were screened using human rights criteria |
24 | Responsible purchasing | 2 | ||
| Society | ||||||
| Anti-corruption | G4-DMA G4-S04 |
Management approach of material aspects Percentage of employees who have undergone training in the organisation's policies and procedures regarding anti-corruption |
20, 25 24 |
The Group intends to report this indicator in greater detail in the 2017 sustainability report. |
Responsible purchasing | 10 10 |
| G4-SO5 | Actions taken due to corruption incidents | 25 | Responsible purchasing | 10 | ||
| Product responsibility | ||||||
| Product and workshop quality |
G4-DMA | Management approach of material aspects | 20, 24 | |||
| G4-PR1 | Percentage of significant product and service categories for which health and safety impacts are assessed for improvement |
24–25 | Product and workshop quality | |||
| Labelling of products and services |
G4-DMA | Management approach of material aspects | 24–25 | |||
| G4 PR5 | Procedures for customer satisfaction, including results from customer surveys |
26–27 | Customer satisfaction |
At 31 December 2016, the total market value of the company was SEK 6.2 billion. The share's highest closing price in 2016 was quoted at SEK 205.0 on 3, 4 and 10 May. The lowest closing price was quoted on 24 November at SEK 152.5. At 31 December 2016, there were 9,484 shareholders.
As per 31 December 2016, Mekonomen's share capital amounted to SEK 90 M (90) and comprised 35,901,487 shares (35,901,487) at a quotient value of SEK 2.50 per share (2.50). Each share carries one vote at the Annual General Meeting and all shares carry equal entitlement to a share in the company's profits and assets.
Each shareholder is entitled to vote for all their shares with no restrictions and the shares are not included in any transfer restrictions.
The Board of Directors proposes a dividend of SEK 7.00 per share, which corresponds
to around 75 per cent of the period's profit after tax. The Group's policy is that dividends shall correspond to at least 50 per cent of the year's profit after tax. Based on the price of Mekonomen's share at year-end, the dividend corresponds to a direct return for 2016 of 4.1 per cent.
Mekonomen's communication to the capital market aims to provide the market reliable, accurate and current information regarding the company's position, operations and development. The information should increase the knowledge about and interest in the company.
We continuously conduct a dialogue with existing and potential investors and with the analysts who follow us. In 2016, we had individual meetings with some 60 managers and analysts, both Swedish and international.
Besides presentations in connection with interim reports and the Annual General Meeting, in March 2016, we held a capital
market day where we presented Mekonomen Group's operations and strategy for the future to investors, analysts, media and other stakeholders. In 2016, we also participated in a number of large investor seminars and share meetings of the Swedish Shareholders' Association.
Foreign owners, 43.1%
Swedish owners of which: Fund managers, 20.8% Private individuals, 20.6% Pension and insurance companies, 10.3% Others, 5.2%
Source: Modular Finance
| Share capital, total, | ||||
|---|---|---|---|---|
| Year | Transaction | Nominal value, SEK | Shares, total | SEK |
| 1990 | Formation of company | 100.00 | 1,000 | 100,000.00 |
| 1998 | Bonus issue | 100.00 | 400,000 | 40,000,000.00 |
| 1998 | Split 1:10 | 10.00 | 4,000,000 | 40,000,000.00 |
| 1999 | New share issue | 10.00 | 5,434,444 | 54,344,440.00 |
| 2000 | New share issue | 10.00 | 7,252,626 | 72,526,260.00 |
| 2001 | Redemption of convertible bonds | 10.00 | 7,286,626 | 72,866,260.00 |
| 2002 | Redemption of convertible bonds | 10.00 | 7,385,226 | 73,852,260.00 |
| 2003 | Redemption of convertible bonds | 10.00 | 7,397,326 | 73,973,260.00 |
| 2003 | Split 2:1 | 5.00 | 14,794,652 | 73,973,260.00 |
| 2003 | Redemption of convertible bonds | 5.00 | 14,869,150 | 74,345,750.00 |
| 2004 | Redemption of convertible bonds | 5.00 | 15,304,618 | 76,523,090.00 |
| 2004 | New share issue | 5.00 | 15,434,411 | 77,172,055.00 |
| 2005 | Split 2:1 | 2.50 | 30,868,822 | 77,172,055.00 |
| 2011 | New share issue | 2.50 | 32,814,605 | 82,036,512.50 |
| 2012 | New share issue | 2.50 | 35,901,487 | 89,753,717.50 |
Source: Modular Finance
| Name | Number of shares |
Votes and capital, % |
|---|---|---|
| LKQ Corporation | 9,516,235 | 26.5 |
| Fjärde AP-Fonden | 2,898,195 | 8.1 |
| Lannebo Fonder | 2,053,445 | 5.7 |
| Eva Fraim Påhlman | 2,009,176 | 5.6 |
| Handelsbanken Fonder | 1,873,400 | 5.2 |
| Swedbank Robur Fonder | 1,173,631 | 3.3 |
| Didner & Gerge Fonder | 1,071,991 | 3.0 |
| Ing-Marie Fraim Sefastsson | 1,000,000 | 2.8 |
| Catella Fonder | 689,307 | 1.9 |
| Fidelity | 662,790 | 1.8 |
| Svolder | 621,367 | 1.7 |
| Kempen Capital Management | 554,959 | 1.5 |
| Försäkringsbolaget PRI | 429,323 | 1.2 |
| Dimensional Fund Advisors | 327,578 | 0.9 |
| Leif Möller | 319,700 | 0.9 |
| Total 15 largest shareholders | 24,881,397 | 69.3 |
| Other | 11,020,090 | 30.7 |
| Size class | Number of shareholders |
Number of shares |
Votes and capital, % |
|---|---|---|---|
| 1 – 100 | 4,588 | 182,155 | 0.5 |
| 101 – 200 | 1,311 | 225,858 | 0.6 |
| 201 – 300 | 541 | 149,627 | 0.4 |
| 301 – 400 | 880 | 345,706 | 1.0 |
| 401 – 500 | 377 | 184,517 | 0.5 |
| 501 – 1,000 | 864 | 720,708 | 2.0 |
| 1,001 – 2,000 | 428 | 683,381 | 1.9 |
| 2,001 – 5,000 | 264 | 880,870 | 2.5 |
| 5,001 – 10,000 | 87 | 647,750 | 1.8 |
| 10,001 – 20,000 | 46 | 671,298 | 1.9 |
| 20,001 – 50,000 | 44 | 1,492,992 | 4.2 |
| 50,001 – 100,000 | 18 | 1,236,995 | 3.4 |
| 100,001 – 10,000,000 | 36 | 28,479,630 | 79.3 |
| Total | 9,484 | 35,901,487 | 100.0 |
Source: Modular Finance
Source: Modular Finance
| Amounts in SEK per share unless otherwise stated | 2016 | 2015 | 2014 | 2013 | 2012 |
|---|---|---|---|---|---|
| Profit, continuing operations | 9.32 | 11.77 | 12.80 | 9.81 | 11.57 |
| Profit, discontinued operations | 0.00 | 0.00 | -9.46 | -1.25 | -0.76 |
| Profit | 9.32 | 11.77 | 3.34 | 8.56 | 10.80 |
| Cash flow | 15.1 | 12.2 | 11.5 | 15.5 | 14.9 |
| Shareholders' equity | 64.4 | 59.7 | 57.5 | 62.1 | 64.2 |
| Dividend1) | 7.00 | 7.00 | 7.00 | 7.00 | 7.00 |
| Share of profit paid, % | 75 | 59 | 210 | 82 | 65 |
| Share price at year-end | 171.5 | 173.0 | 204.0 | 198.0 | 206.5 |
| Share price, highest for the year | 207.0 | 234.5 | 207.0 | 233.0 | 246.0 |
| Share price, lowest for the year | 150.5 | 170.0 | 139.0 | 189.0 | 180.0 |
| Direct yield, % | 4.1 | 4.0 | 3.4 | 3.5 | 3.4 |
| P/E ratio at year-end, multiple | 18.4 | 14.7 | 61.1 | 23.1 | 19.1 |
| Average number of shares after dilution effects2) | 35,901,487 | 35,901,487 | 35,901,487 | 35,901,487 | 34,695,410 |
| Number of shares at end of period | 35,901,487 | 35,901,487 | 35,901,487 | 35,901,487 | 35,901,487 |
| Number of shareholders at year-end | 9,484 | 9,373 | 9,664 | 8,355 | 8,138 |
1) The Board's proposal for 2016.
2) No dilution is applicable.
The shareholders of Mekonomen Aktiebolag (publ), corporate identity number 556392-1971, are hereby invited to attend the Annual General Meeting at 3:00 p.m. on 25 April 2017 at SF Skandia, Drottninggatan 82, Stockholm, Sweden. Registration for the Annual General Meeting will open at 2:00 p.m.
Shareholders wishing to participate the Annual General Meeting must
In addition to notifying their attendance, shareholders who have nominee-registered shares through a bank or other nominee must temporarily re-register the shares in their own name in the shareholders' register by 19 April 2017 in order to be entitled to participate in the Annual General Meeting. Shareholders should notify their nominees of this well in advance of this date.
Shareholders who are represented by proxy must issue a written and dated power of attorney for their proxy. If the power of attorney is issued by a legal entity, copies of authorization documents (certificate of registration or similar) must be enclosed. To facilitate registration at the Annual General Meeting, the power of attorney, in original, and any authorization documents should be sent by post well in advance of the Annual General Meeting to the following address: Årsstämma i Mekonomen Aktiebolag, c/o Euroclear Sweden AB, PO Box 7842, SE-103 98 Stockholm, Sweden. Proxy forms are available for download from company's website: www.mekonomen.com.
The Board proposes a dividend of SEK 7.00 (7.00) per share to the Annual General Meeting. The Board proposes 27 April 2017 as the record day for the dividend. If the Annual General Meeting adopts the proposal, the dividend is expected to be paid on Wednesday, 3 May 2017. The final day for trading the company's shares including the right to dividends is 25 April 2017.
Printed Annual Reports will be distributed only to shareholders requesting them approximately one week before the Annual General Meeting.
| Information | Period | Date |
|---|---|---|
| Interim report | January–March 2017 | 10 May 2017 |
| Interim report | January–June 2017 | 28 July 2017 |
| Interim report | January–September 2017 | 7 November 2017 |
Interim report January–March 2017 10 May 2017 Interim report January–June 2017 28 July 2017 Interim report January–September 2017 7 November 2017 Year-end report January–December 2017 9 February 2018
President and CEO Tel: +46 8 464 00 00 E-mail: [email protected]
CFO Tel: +46 8 464 00 00 E-mail: [email protected]
Head of Investor Relations Mobile: +46 72 234 29 58 E-mail: [email protected]
The analysts below continuously monitor Mekonomen. Please note that these analysts' estimates, forecasts or other opinions do not represent Mekonomen or its company management.
Carnegie Mikael Löfdahl Handelsbanken – Nordea Stellan Hellström Pareto Securities Erik Paulsson SEB Nicklas Fhärm Swedbank Mats Liss
ABG Sundal Collier Andreas Lundberg
The Board of Directors and President of Mekonomen AB (publ.) corporate identity number 556392-1971, hereby submit the Annual Report and consolidated financial statements for the 2016 financial year.
Mekonomen Group consists of the leading car service chains in the Nordic region with a proprietary wholesale operation, more than 340 stores and over 2,000 affiliated workshops operating under the Group's brands.
Mekonomen Group comprises the Group companies MECA Scandinavia, Mekonomen Sweden, Mekonomen Norway and Sørensen og Balchen. The companies mainly cooperate in purchasing and logistics. There is full competition in the market, however. Our strong brands have differentiated concepts, target groups and individual development focus.
We offer a broad and easily accessible range of affordable and innovative solutions and products for consumers and companies. Mekonomen Group's three brands MECA, Mekonomen and BilXtra are responsible for their own wholesale operations. The approximately 340 stores deliver to more than 2,000 affiliated workshops and to other workshops and consumers. In the Group, there are also around 30 proprietary workshops.
The Parent Company has its registered office in Stockholm. The address of the head office is Box 19542, SE-104 32 Stockholm, Sweden. Visiting address: Solnavägen 4, 10th floor. The Parent Company's share is listed on Nasdaq Stockholm Mid Cap segment. The three largest owners in the Parent Company as per 31 December 2016 are LKQ Corporation, with 26.5 per cent, Fjärde AP-Fonden, with 8.1 per cent and Lannebo Fonder, with 5.7 per cent.
The 2016 financial year has been an eventful year for Mekonomen Group, where important decisions were made and several efforts were done to strengthen the Group for the future. However, the year was also largely affected by the weak development in Mekonomen Sweden.
In 2016, Mekonomen Group's revenue for the continuing operations increased 3 per cent to SEK 5,937 M (5,761) and operating profit (EBIT) amounted to SEK 481 M (616).
A strong sales increase to MECA Car Service workshops was an important factor behind MECA's sales growth during the year.
In 2016, Sørensen og Balchen generated its best earnings to-date, with a good sales trend to affiliated BilXtra workshops and a good development in accessory sales and cost control.
The lower earnings mainly in Mekonomen Sweden resulted in an action programme with savings of SEK 25 M annually, with full effect from 2017. In connection with the action programme, there was also a break in the roll-out of the new store data system in Sweden.
After the end of the period, the action programme was expanded to SEK 45 M, where the increase covers the whole Mekonomen Group, with full effect as of the third quarter of 2017.
During the year, we have seen a gross margin pressure, mainly in Norway, which is primarily due to the growth of the proportion of our sales to affiliated workshops and large customers, and to price competition in Norway. We believe that this trend will continue in the future.
The Group-wide proprietary brand ProMeister continues to develop and sales of ProMeister spare parts amounted to nearly SEK 600 M in 2016. Sales to affiliated workshops also demonstrated good growth during the year.
During the year, MECA established the heavy vehicles business area for Mekonomen Group. In addition to spare parts for cars and light trucks, the Group now also offers spare parts for vehicles over 3 tonnes. This effort began with a framework agreement with Nobina regarding deliveries of batteries to the public transport operator's vehicle fleet and depots in Sweden, Norway, Denmark and Finland.
The remaining Danish operations were divested in December 2016 to the Danish company T. Hansen Gruppen/AD Danmark. Besides stock, staff and rental agreements, the divestment also included T. Hansen Gruppen/AD Danmark being given the right to use the Mekonomen brand in Denmark and operate the workshop chains Mekonomen Autoteknik and MekoPartner. In connection with the divestment, a delivery agreement was established between MECA and T. Hansen Gruppen/AD Danmark as a part of the transaction.
As a part of streamlining the logistics structure, the decision was made in 2016 to centralise the stock structure in Mekonomen Group through the renovation of Mekonomen's central warehouse in Strängnäs with a new fully automated section. The project will be under way in the next few years and positive EBIT is estimated as of 2020.
In Mekonomen Sweden, a fleet agreement was signed with LKAB on the delivery of spare parts to the mining company's operations in Kiruna, Svappavaara, Malmberget and Luleå. LKAB's vehicle fleet consists of approximately 900 vehicles (cars and light trucks), which are largely used in mining.
For the third consecutive year, Mekonomen has been named the strongest brand in the industry for "Car parts and auto workshops". The prize was awarded during the Swedish Brand Awards 2016 and is based on a survey of Sweden's consumers regarding customer satisfaction and brand awareness.
MECA acquired a customer portfolio for oil sales to industrial customers in Norway.
In 2016, Mekonomen Group established an upper-secondary education programme for mechanics. The first programme is planned to begin in autumn 2017.
In October, Pehr Oscarson was appointed the acting CEO of Mekonomen Group after former CEO Magnus Johansson resigned. After the end of the financial year, the Board appointed Pehr Oscarson as the President and CEO, effective as of 1 March 2017.
The total number of stores in the chains at the end of the year was 342 (342), of which 261 (257) were proprietary stores. There were a total of 2,021 affiliated workshops (2,126).
Revenue for the continuing operations rose 3 per cent to SEK 5,937 M (5,761). Excluding the acquisition of Opus Equipment for the period January to June 2016, revenue rose by 2 per cent. Adjusted for negative currency effects of SEK 69 M, revenue increased 4 per cent. There were two more workdays in Sweden, Norway and Finland and three more days in Denmark compared with the previous year. Calculated on comparable workdays and adjusted for currency effects, revenue increased 4 per cent. Sales in comparable units rose 4 per cent. Other operating revenue mainly comprises of rental income, marketing subsidies and exchange-rate gains.
EBITA for the continuing operations amounted to SEK 594 M (726) and the EBITA margin amounted to 10 per cent (13). Earnings were negatively impacted by non-recurring effects of SEK 58 M (negative: 22), of which SEK 25 M (0) related to the divestment of the Danish export operations and SEK 13 M (0) pertained to personnel-related non-recurring costs for people who were a part of Group Management, primarily SEK 11 M (0) for the former CEO, and SEK 6 M (0) related to the recall of Volvo cars where defective driving belts were installed. Excluding the divestment, MECA's export business to Denmark negatively impacted EBITA by SEK 27 M (negative 31). Currency effects on the balance sheet positively impacted EBITA by SEK 3 M (0).
EBIT for the continuing operations amounted to SEK 481 M (616) and the EBIT margin amounted to 8 per cent (11). Earnings were negatively impacted by non-recurring effects of SEK 58 M (negative: 22), of which SEK 25 M (0) related to the divestment of the Danish export operations and SEK 13 M (0) pertained to personnel-related non-recurring costs for people who were a part of Group Management, primarily SEK 11 M (0) for the former CEO, and SEK 6 M (0) related to the recall of Volvo cars where defective driving belts were installed. Excluding the divestment, MECA's export business to Denmark negatively impacted EBIT by SEK 27 M (negative 31). Currency effects on the balance sheet positively impacted EBIT by SEK 3 M (0).
| 2016 | 2015 | |
|---|---|---|
| Gross profit | -42 | -11 |
| Operating costs (excluding depreciation and impairment) |
-13 | -11 |
| Impairment of tangible fixed assets | -3 | – |
| EBIT | -58 | -22 |
Profit after financial items for the continuing operations amounted to SEK 446 M (594). Net interest expense amounted to SEK 23 M (27) and other financial items to an expense of SEK 12 M (income: 5). Other financial items were negatively impacted by non-recurring effects of SEK 1 M (positive: 7).
Profit after tax amounted to SEK 342 M (430) for the continuing operations, SEK 0 M (0) for discontinued operations and SEK 342 M (430) in total. Corporate tax in Norway was lowered from 27 per cent to 25 per cent as of 2016, which had a positive impact on the tax expense of
SEK 7 M. Tax deductions regarding Denmark are estimated at a total of SEK 76 M (54), of which SEK 10 M (negative 6) positively affected the year's tax expense. Earnings per share, before and after dilution, amounted to SEK 9.32 (11.77) for the continuing operations, SEK 0.00 (0.00) for discontinued operations and SEK 9.32 (11.77) in total.
Mekonomen Group has no actual seasonal effects in its operations. However, the number of workdays affects both sales and profit.
The MECA segment primarily includes wholesale and store operations in Sweden and Norway, the export business to Denmark to the end of 28 December 2016, and delivery and service of workshop equipment in Opus Equipment. As of 1 January 2015, store operations in Denmark are presented as discontinued operations and therefore are not included in the MECA segment.
Net sales (external) amounted to SEK 2,039 M (1,871). The currency effect in net sales against the NOK was a negative SEK 26 M. The underlying net sales increased 10 per cent.
EBITA amounted to SEK 217 M (258) and the EBITA margin amounted to 10 per cent (14). MECA's operating profit amounted to SEK 205 M (245) and the EBIT margin was 10 per cent (13).
A strong sales increase to MECA Car Service workshops was an important factor behind MECA's sales growth during the year.
The Danish export operations, which were divested to T. Hansen Gruppen on 28 December, negatively impacted MECA's EBIT by SEK 52 M (negative 31), of which SEK 25 M is a non-recurring effect related to the divestment. Net sales for the export business to Denmark amounted to SEK 67 M (54) during the year.
Relative to the comparative period, Opus Equipment AB, which was acquired on 1 July 2015, impacted MECA's net sales by SEK 54 M, and EBIT negatively by SEK 4 M. Opus Equipment had a negative development during the year. Actions have been taken to strengthen profitability in Opus Equipment.
During the year, MECA had a negative effect on the gross margin from a higher proportion of sales to large customers. In Norway, oil sales to industrial customers were developed during the year.
The number of stores amounted to 85 (85), of which 75 (72) were proprietary.
The Mekonomen Sweden segment primarily includes wholesale, store and fleet operations in Sweden.
Net sales (external) amounted to SEK 1,891 M (1,925). The underlying net sales decreased 3 per cent.
Operating profit before amortisation and impairment of intangible assets (EBITA) amounted to SEK 190 M (289) and the EBITA margin amounted to 10 per cent (14). Operating profit (EBIT) amounted to SEK 187 M (287) and the EBIT margin amounted to 10 per cent (14).
EBIT was negatively impacted by non-recurring costs of SEK 19 M (16).
Since the organisational change that was implemented at the end of 2015 entailed a negative effect on sales and increased personnel costs, a more decentralised sales organisation was reintroduced in Mekonomen Sweden in the fourth quarter.
The new store data system, which negatively impacted sales and earnings during the year, was gradually adapted and improved and the assessment is that the system did not negatively impact sales as of the end of the year in the 30 stores in which it was installed. Continued implementation in 2017 will only take place if we over a longer period have at least the same growth and profitability in these 30 stores as in the other stores in Mekonomen Sweden.
The number of stores amounted to 132 (134), of which 112 (113) were proprietary.
The Mekonomen Norway segment primarily includes store and fleet operations in Norway.
Net sales (external) amounted to SEK 836 M (814). The underlying net sales increased 5 per cent. The currency effect in net sales against the NOK was a negative SEK 23 M.
Operating profit before amortisation and impairment of intangible assets (EBITA) amounted to SEK 132 M (151) and the EBITA margin amounted to 15 per cent (18). Operating profit (EBIT) amounted to SEK 132 M (151) and the EBIT margin amounted to 15 per cent (18).
Operating profit was negatively impacted by non-recurring costs of SEK 1 M regarding the recall of Volvo cars where defective driving belts had been installed. During the comparative period, Mekonomen Norway was negatively impacted by non-recurring effects of SEK 1 M.
In Mekonomen Norway, the most important driver of growth during the year was sales to Mekonomen Service Centres, which however combined with greater competition had a negative effect on the gross margin. During the fourth quarter, growth was more evenly distributed between other workshops and Mekonomen Service Centres.
The number of stores amounted to 45 (45), of which 32 (32) were proprietary.
The Sørensen og Balchen segment primarily includes wholesale and store operations in Norway.
Net sales (external) amounted to SEK 725 M (729). The underlying net sales increased 1 per cent. The currency effect in net sales against the NOK was a negative SEK 20 M.
Operating profit before amortisation and impairment of intangible assets (EBITA) amounted to SEK 117 M (117) and the EBITA margin amounted to 16 per cent (16). Operating profit (EBIT) increased to SEK 117 M (116) and the EBIT margin amounted to 16 per cent (16).
Sørensen og Balchen had a good sales trend to affiliated BilXtra workshops, as well as a strong development of accessory sales, such as those through its own brand Carwise, which in combination with greater competition had a negative effect on the gross margin, however. Sørensen og Balchen has maintained good cost control.
The number of stores amounted to 72 (70), of which 37 (35) were proprietary.
MECA acquired one store in Höör, Sweden and two partner stores in Tomelilla and Charlottenberg, Sweden, established Opus Equipment in Norway and acquired a customer portfolio for oil sales to industrial customers in Norway.
Mekonomen Sweden acquired non-controlling interests in 11 stores, all for a minor value. Mekonomen Sweden also acquired a partner store in Halmstad and established a store in Älmhult.
Mekonomen Norway acquired a workshop in Drammen, Norway. Sørensen og Balchen established two stores in Norway, one in
Stord and one in Trysil. Meko Service Nordic acquired three workshops in Sweden, one in Mölndal and two in Helsingborg. Meko Service Nordic also acquired noncontrolling interests in three workshops in Sweden, all for a minor value.
Investments in fixed assets for the year amounted to SEK 111 M (103). Depreciation and impairment of tangible fixed assets amounted to SEK 62 M (57).
As a part of streamlining the logistics structure, Mekonomen Group will centralise the central warehouse structure in Sweden. In July 2016, Mekonomen Group signed an agreement with TGW Logistics Group for the expansion of the existing central warehouse in Strängnäs with a new fully automated section. The expansion will take place with
the aim of creating a shared, flexible and cost-effective supply chain platform in the Group. The estimated investment is SEK 190 M during the period 2016-2018 with full EBIT effect from savings of SEK 50 M per year beginning in 2020. Capital tied-up is estimated to decrease by SEK 80 M with full effect beginning in 2020.
Company and business combinations amounted to SEK 31 M (68), of which SEK 14 M (0) relates to the estimated supplementary purchase considerations. Acquired assets totalled SEK 5 M (79) and assumed liabilities SEK 0 M (38). In addition to goodwill, which amounted to SEK 5 M (16), surplus values on intangible fixed assets of SEK 21 M (12) were identified with regard to customer relations. Deferred tax liabilities attributable to acquired intangible fixed assets amounted to SEK 0 M (1). Acquired non-controlling interests amounted to SEK 14 M (17) and divested minority shares to SEK 0 M (9). Divested operations amounted to SEK 29 M (9).
Mainly as a result of less working capital tied up, the cash flow from operating activities increased to SEK 544 M (439), of which discontinued operations accounted for SEK -17 M (-134). Tax paid amounted to SEK 153 M (189). Cash and cash equivalents amounted to SEK 291 M (295) at year-end. The equity/assets ratio was 43 per cent (40). Long-term interest-bearing liabilities amounted to SEK 1,338 M (1,469). Current interest-bearing liabilities amounted to SEK 404 M (461).
Net debt amounted to SEK 1,437 M (1,626), which is a decrease of SEK 190 M since year-end. It is primarily a positive cash flow from operating activities that reduced net debt during the year. The items that increased net debt are mainly share dividends of SEK 259 M, of which SEK 251 M was a dividend to the Parent Company's shareholders, as well as investments and acquisitions. SEK 136 M in loans were repaid during the year.
The number of employees in continuing operations at the end of the year was 2,290 (2,348) and the average number of employees during the year was 2,287 (2,290).
Mekonomen Group has well-developed HRM (Human Resource Management) work that includes equal opportunities plans, action programmes against discrimination in the workplace, clear goals and goal follow-ups, reporting and explicit segregation of responsibilities.
Mekonomen Group has participated in several external projects relating to issues in such areas as diversity and the labour market for a number of years. The aim is for Mekonomen Group's work sites to reflect our customer target groups and the society in which we live, and thus create business value in a credible manner.
The Group's employee surveys include questions about job satisfaction and working conditions, and whether individual employees are able to influence their work situation. Since the employee survey captures the views of all employees, the results can be used at several levels to introduce operational improvements, from an overall level down to individual group/unit level.
Mekonomen Group's skills and development initiatives are intended not only to meet today's needs but also to anticipate the future challenges of tomorrow's society: a fossil-free car fleet, a service society, urbanisation and a shared economy. This way, Mekonomen Group can ensure future competitiveness for the Group and the skills of individual employees in proprietary and affiliated workshops. A fundamental approach at Mekonomen Group is to capitalise on the skills available in the Group and develop them through further training and opportunities for new challenges within the Group. Internal recruitment within and between Group companies is highly successful.
ProMeister Academy is the Group's own training centre that secures the quality and skills of our mechanics in all of the Group's workshop chains. Skills development is offered in new technologies, customer service and professionalism. In 2016, interest in hybrid car training grew strongly. Since the end of 2016, we also offer electric car training to meet the trend of more electric powered cars in the Nordic region in the future. Since ProMeister Academy was founded in 2013, the number of training days for mechanics increased by 15 per cent.
Remuneration of senior executives is presented in Note 5. The Board of Directors will propose the following guidelines for remuneration of senior executives to the 2017 Annual General Meeting.
The Board considers it very important to ensure that there is a clear link between remuneration and the Group's values and financial goals in both the short and the long term. The Board's proposals for guidelines for remuneration entail that the company is to offer market-based remuneration that allows the Group to recruit and retain the right executives, and entail that the criteria for determining remuneration is to be based on the significance of work duties and employees' competencies, experience and performance. Remuneration is to comprise:
• other benefits and severance pay. The guidelines encompass Group Management, which currently comprises six individuals including the President.
Remuneration is determined by the Board's Remuneration Committee. However, remuneration of the President is determined by the Board in its entirety.
The company is to offer an attractive basic salary in the market, in the form of a fixed cash monthly salary. This comprises remuneration for dedicated work performance at a high professional level that creates added value for Mekonomen's customers, owners and employees.
In addition to basic salary, short-term and long-term variable cash remuneration is to be offered, both of which are based on fulfilment of Mekonomen's goals for:
The distribution between basic salary and variable remuneration is to be proportionate to the senior executive's responsibilities and authorities.
The short-term variable remuneration is maximised to a certain percentage of fixed annual salary. The percentage is linked to the position of each individual and varies between 33 and 60 percentage points for members of Group Management.
Other benefits refer primarily to company cars. Pension premiums are paid in an amount that is based on the ITP plan or a corresponding system for employees outside Sweden. For the President, pension provisions according to the employment agreement are paid in an amount corresponding to 30 per cent of basic salary. Pensionable salary comprises basic salary. The period of notice for the President is 12 months if employment is terminated by the company, and six months if terminated by the President. The period of notice for other members of Group Management is 12 months if employment is terminated by the company, and six months if terminated by the employee. In addition, severance pay of a maximum of 12 months salary may be paid in the event of termination of employment by the company.
Furthermore, a long-term variable remuneration programme was adopted by the 2016 Annual General Meeting. The long-term variable remuneration is to be calculated on the Group's profit for the 2016- 2018 financial years. A number of selected, business-critical senior executives will be offered the opportunity to participate in this long-term
programme, in addition to the six members of Group Management. The criteria for determining the variable remuneration portion for each individual is decided by the Board's Remuneration Committee, and for the President by the Board in its entirety. The company's total cost for the long-term programme may amount to a maximum of SEK 32 M for the entire period. Furthermore, an additional requirement to the above is that the average price paid for the Mekonomen share on Nasdaq Stockholm on the last trading day in December 2018 is to exceed the Nasdaq Stockholm PI index for the programme period. The bonus may be realised in whole, in part or not at all depending on the consolidated profit during the duration of the long-term remuneration programme.
The right to variable remuneration presupposes that the executive is still employed at the 2019 Annual General Meeting.
Mekonomen Group's earnings are affected by a number of factors, such as sales volume, currency fluctuations on imported goods and sales to foreign subsidiaries, margins on purchased products, salary changes, etc. Imports mainly take place from Europe where the currencies are generally EUR, SEK and NOK. Purchases in EUR comprised approximately 37 per cent of the purchased volumes. The table below shows the currency effects on the net flow for each currency. NOK impacted internal sales from Mekonomen Grossist AB and from MECA Car Parts AB to each country and profit for the year in Norway. Refer to Note 37 for more detailed information on how the Group manages currency risk.
| Change, % |
Impact, SEK M1) |
|
|---|---|---|
| Sales volumes | +1 | 31 |
| Exchange-rate fluctuations | ||
| - NOK | +10 | 90 |
| - EUR | +10 | -96 |
| Gross margin | plus a percentage point | 58 |
| Personnel costs | +1 | -15 |
| Interest, adjusted for interest-rate swap2) | +1 | -10 |
1) With all else equal, profit before tax for the 2016 financial year.
2) The effect is based on the Group's net debt of SEK 1,437 M, as at 31 December 2016 adjusted for an interest-rate swap of SEK 450 M.
The Group's currency exposure in the translation of assets and liabilities in foreign currencies was mainly against NOK and EUR as of the closing date. The effects on earnings in the translation of financial assets and liabilities that existed at 31 December 2016 are presented below:
The above estimated effect as of 31 December 2016 vary from month to month, depending on the size of the balance-sheet items at the closing date.
Mekonomen Group's primary competitors are players in the so-called brand-dependent segment, which traditionally had a high market share in the aftermarket for passenger cars.
Competition in spare-parts sales to workshops is considerable from both brand-dependent and brand-independent players. In the brand-independent trade in Sweden, there are more than 400 stores, where the five largest players, including Mekonomen Sweden and MECA, and all have a range that covers most vehicle brands. The situation is similar in Norway with a few large players offering a comprehensive range but with competition from a number of smaller players, including online players. Brand-dependent players also compete with Mekonomen Group in the market for car part sales. In this market, availability is very important, which means that the rate of delivery is a key competitive factor.
In terms of accessories, Mekonomen Group competes with a large number of players from various industries, such as petrol stations, the convenience-goods trade, stores for products for children, stores for accessories for pets, electronic chains, etc.
The company is highly aware that the increasingly centralised IT structure could provide the Group with major advantages and improved opportunities. This also entails major risks in the form of operational stops in central functions pertaining to the Group's systems for order and inventory management. There is also a risk of an external attack on the IT structure through viruses, hacking, digital trespassing and information theft.
Major emphasis is placed on the Group's fire prevention work since a fire at any of the Group's central warehouses would have a major impact on the service to the Group's customers.
Access to skilled mechanics in Mekonomen Group's affiliated workshops and in Mekonomen Group's proprietary workshops is important to the growth of Mekonomen Group. A shortage of mechanics inhibits the possibility to grow.
Since the Group's operations include cash management, this entails a risk of theft, with respect to stores and transportation of cash to the bank. Mekonomen Group strives to provide the same level of solutions for security services, security systems and cash management for all companies within the Group.
The Group's operations include sales and storage of a large number of products. Since a large portion of these products are theft-prone, there is always a risk of shrinkage. At Mekonomen Group, work is continuously in progress to define scrapping, internal consumption and actual theft. The work to combat shrinkage is based on the idea that it is important to focus on all types of shrinkage, for example, by reviewing order procedures, delivery checks and unpacking of goods. This will improve knowledge of procedures to manage shrinkage, while providing a basis for higher vigilance on goods that are particularly theft-prone.
Through its operations, Mekonomen Group is exposed to currency, credit, interest-rate and liquidity risks. Refer to Note 37 for a description of the financial risks identified and managed by Mekonomen Group.
The Parent Company's operations comprise mainly Group Management and finance management. As of 1 April 2016, all employees except Group Management were moved from the Parent Company to a central company that handles Group-wide functions for Mekonomen Group. The Parent Company's loss after net financial items amounted SEK 57 M (loss: 53), excluding impairment of participations in subsidiaries of SEK 28 M (35) and excluding dividends of SEK 47 M (489) from subsidiaries. The average number of employees was 7 (15). Mekonomen AB sold products and services to Group companies totalling SEK 35 M (37).
As of 1 January 2016, what was previously reported as "Other" has been divided up into "Other segments" and "Other items" and more units were added to "Other segments" from the now discontinued
Mekonomen Nordic segment. Comparative figures are recalculated. For further information, refer to Note 3 Segment information.
"Other segments" include business activities and operating segments for which information is not provided separately. This includes Mekonomen's wholesale and store operations in Finland, Mekonomen's store operations in Iceland, Marinshopen, Meko Service Nordic with the service centre operations BilLivet and Speedy, the Car Share operations, Mekonomen car leasing, the joint venture in Poland (InterMeko Europa), the associated company Automotive Web Solutions AB, Lasingoo Norge and Group-wide functions including Mekonomen AB (publ). EBIT for "Other segments" amounted to a loss of SEK 84 M (loss: 106). EBIT was negatively impacted by non-recurring effects of SEK 13 M (1). The 2016 effects related to personnel-related non-recurring costs for individuals who were members of Group Management, mainly the former CEO in an amount of SEK 11 M.
"Other items" include acquisition-related items attributable to Mekonomen AB's direct acquisitions and elimination of intra-Group revenue. Current acquisition-related items are amortisation of acquired intangible assets related to the acquisitions of MECA and Sørensen og Balchen in an amount of SEK -77 M (-77).
The Group does not conduct any operations that require permits according to the Swedish Environmental Code. The Group's environmental impact in the Nordic region mainly takes place in the areas of energy, transportation and the handling of chemicals. Our wholesale facilities, proprietary stores and workshops in MECA Sweden and Norway and Mekonomen Sweden have achieved the most with their environmental work, for example, all of these facilities hold ISO 14001 certification. Mekonomen's proprietary operations in Sweden have come one step further by also holding occupational health and safety (OHSAS 18001) and quality management (ISO 9001) certifications. Environmental work comprises surveys of the most significant environmental impact of the operations, and includes environmental policies, certified environmental management systems and environmental manuals describing procedures, monitoring and responsibilities. Environmental management systems undergo external audits every year, and environmental goals and monitoring procedures are determined for each financial year. For further information on the Group's environmental efforts, refer to pages 24–25.
Board members Caroline Berg and Mia Brunell Livfors made their positions available and at the Extraordinary General Meeting on 10 January 2017, in accordance with the proposal by LKQ, Joseph M. Holsten and John S. Quinn were elected as members of the company's Board of Directors. John S. Quinn was elected to be the Executive Vice Chairman.
The Board of Mekonomen AB appointed Pehr Oscarson the President and CEO of Mekonomen Group, effective as of 1 March 2017.
As stated in a press release on 6 March 2017, Per Hedblom is leaving the post of CFO at his own request for a new assignment with a different employer. The process of finding a new CFO for Mekonomen Group will begin immediately. Per Hedblom ends his position as CFO no later than September 2017.
No other significant events occurred after the end of the financial year.
Market growth was stable in 2016. On condition that scrapping or exports of cars do not increase, we see potential for a growing overall market in 2017, mainly due to strong new car sales in recent years and a growing fleet of cars in Sweden and Norway.
Our focus in 2017 is to drive growth in all of our Group companies, where the highest priority is breaking the trend in Mekonomen Sweden. During the year, we will strengthen our customer offering, partly through launch of new categories in ProMeister and the launch of the next generation spare parts catalogue and e-commerce platform. We are also continuing to focus on the development of the offering to our affiliated workshops. The project to establish a new Swedish automated central warehouse is proceeding according to plan.
Even if the greatest focus is increasing sales, it is important that this takes place with good cost control. Consequently, we will increase our previously communicated cost and efficiency programme from SEK 25 M to SEK 45 M on an annual basis, with full effect as of the third quarter of 2017. We will also have greater focus on streamlining and optimising our warehouses in the stores to further strengthen cash flow.
As per 31 December 2016, the share capital of Mekonomen AB (publ) amounted to SEK 90 M (90) and comprised 35,901,487 shares (35,901,487) at a quotient value of SEK 2.50 per share (2.50). Each share carries one vote at the Annual General Meeting and all shares carry equal entitlement to a share in the company's profits and assets. Each shareholder is entitled to vote for all their shares with no restrictions and the shares are not included in any transfer restrictions.
LKQ Corporation represents 26.5 per cent of the number of votes. For information about the 15 largest shareholders as per 31 December 2016, refer to the table on page 31.
The Annual General Meeting resolved in April 2016 to authorise the Board, for the period until the next Annual General Meeting, on one or more occasions, with or without preferential rights for shareholders, to make decisions on new share issues of not more than 3,590,149 shares.
At the end of the financial year, no new shares were issued under this authorisation.
It is the Board's intention that Mekonomen Group will pay dividends corresponding to not less than 50 per cent of profit after tax. When determining future dividends, consideration is primarily given to investment needs, but other factors deemed significant by the Board are also considered.
As far as the Board of Mekonomen AB (publ) is aware, no shareholder agreements exist or other agreements between Mekonomen's shareholders for joint influence over the company. As far as the Board of Mekonomen AB (publ) is aware, there are no agreements or similar that may result in a change in the control of the company.
The Board of Directors proposes a dividend of SEK 7.00 (7.00) per share. The Board proposes 27 April 2017 as the record day for the dividend. If the Annual General Meeting resolves to approve the proposal, the dividend will be paid on 3 May 2017. The final day for trading the company's shares including the right to dividends is 25 April 2017.
The Annual General Meeting on 12 April 2016 resolved that the Board was to comprise seven ordinary members with no deputy members. In accordance with the Nomination Committee's suggestion, the Annual General Meeting resolved to re-elect Kenneth Bengtsson (Chairman), Caroline Berg, Kenny Bräck, Malin Persson, Helena Skåntorp and Christer Åberg and to elect Mia Brunell Livfors as a new Board member (Executive Vice Chairman).
During 2016, the Board held 15 (12) meetings, of which one was a statutory meeting. The Board meetings during the year addressed the fixed items of each meeting agenda, such as business situation, financial reporting and investments. Other issues discussed in the Board during the year were strategies, market development, Mekonomen's Swedish operations, the Danish operations and recruitment of a new President. In addition, selected Board meetings discussed issues relating to annual accounts, interim reports and budget.
The Board has established a Remuneration Committee and an Audit Committee. The Committees' work mainly comprises preparing issues and providing consultation, although the Board can delegate authority to make decisions in specific cases. The members and Chairmen of the Committees are appointed at the statutory Board meeting held directly after the election of Board members. For more information, refer to page 41.
The auditors of the company are elected annually at the Annual General Meeting. According to a resolution of the Annual General Meeting, auditors' fees are paid according to approved invoices. The Group's auditors report to the Board as required, but at least once a year. The Group's external auditors also participate at the meetings of the Audit Committee.
At the 2016 Annual General Meeting, PricewaterhouseCoopers AB (PwC), with Authorised Public Accountant Lennart Danielsson as Auditor in Charge, was appointed as the auditing firm until the 2017 Annual General Meeting.
| The following profit is at the disposal of the Annual General Meeting, |
SEK 000s: |
|---|---|
| - Profit brought forward | 2,430,987 |
| - Profit for the year | 117,591 |
| TOTAL | 2,548,578 |
| The Board of Directors and President propose that profits be appropriated as follows, |
SEK 000s: |
| - Dividend to shareholders (SEK 7.00 per share) | 251,310 |
| - To be carried forward | 2,297,268 |
Following the proposed dividend, the Parent Company's equity/assets ratio will amount to 58 per cent and the Group's equity/assets ratio to 40 per cent calculated on the balance-sheet date of 31 December 2016. The equity/assets ratio is satisfactory considering that the company's and the Group's operations are continuing to operate profitably, which means that the equity/assets ratio following dividend payment in May 2017 will exceed the above-stated levels. It is estimated that cash and cash equivalents in the company and the Group will remain at a satisfactory level.
The Board is of the opinion that the proposed dividends do not prohibit the Parent Company or other Group companies from fulfilling their obligations in the short or long term. Neither do the dividends influence the Group's ability to implement required investments. Taking into account the above and other circumstances known to the Board, the Board believes that a comprehensive assessment of the company's and Group's financial position entails that this dividend is justified taking into consideration the demands imposed by the nature, scope and risks of the operations on the amount of equity in the company and the Group, and the other consolidation requirements, liquidity and position of the company and the Group operations.
For further information regarding the company's and the Group's earnings and financial position, refer to the following income statement, balance sheet, cash-flow statements and accompanying notes.
Mekonomen Group comprises approximately 160 companies that conduct business operations primarily in Sweden, Norway and Finland. The Parent Company of the Group is the Swedish public limited liability company Mekonomen AB, whose shares are listed on the Nasdaq Stockholm.
Mekonomen Group's corporate governance concerns how the operations are governed, managed and controlled in order to create value for the company's shareholders and other stakeholders. The aim of corporate governance is to create the conditions for active and responsible company bodies, to clarify roles and segregation of responsibilities and to ensure true and fair reporting and information.
| External regulations | Internal regulations |
|---|---|
| Swedish Companies Act | Articles of Association |
| Annual Accounts Act | Board's rules of procedure |
| Other relevant laws | Board's instruction for the President |
| Nasdaq Stockholm AB's Rule book for issuers |
Policies, guidelines and instructions |
| Swedish Corporate Governance Code (the Code) |
Code of Conduct and Core Values |
Mekonomen Group applied the Swedish Corporate Governance Code ("the Code") with the following deviation in 2016:
According to the Code, a Board member shall not be the Nomination Committee's chairman.
The Board member Caroline Berg was also the Chairman of the Nominating Committee until 16 December 2016, which deviates from the Code provision that a Board member shall not be the Chairman of the Nomination Committee. The Nomination Committee appointed Caroline Berg as the Nomination Committee Chairman as it was a natural choice considering the ownership structure of Mekonomen at the time.
On December 16, 2016 John S. Quinn was appointed to the Chairman of the Nomination Committee. On January 10, 2017 John S. Quinn was also elected as a Board member of Mekonomen. However, John S. Quinn remain as Chairman of the Nomination Committee when it is a natural choice considering the ownership structure of Mekonomen.
Mekonomen Group's sustainability work is an integrated part of the company's business model and governance. The basis of the work is comprised of the company's core values and code of conduct together with a running stakeholder dialogue and materiality analysis. Reporting takes place according to the guidelines for the Global Reporting Initiative (GRI), G4 core.
Mekonomen Group is a participant to the UN Global Compact and the Sustainability Report 2016 also constitutes Mekonomen Group's Communication of Progress report to the UN Global Compact.
The sustainability work within Mekonomen Group is an integrated part of the operations as a part of the business benefit. The responsibility for the strategic sustainability work, as well as targets and follow-up rests with Group Management. The Board of Directors follows up the work in the Group Management's reporting. The operational work is driven by the head of the respective business areas in collaboration with the managers for the environment and quality in the respective Group companies. The Sustainability Report comprises all of Mekonomen Group's self-owned operations in the Nordic region and pertains to the 2016 financial year.
Read more about Mekonomen Group's sustainability work and the Sustainability Report 2016 in the annual report or at mekonomen.com.
The Mekonomen share has been listed on the Nasdaq Stockholm, Mid Cap segment since 29 May 2000. Share capital amounted to SEK 89,753,718 on 31 December 2016, represented by 35,901,487 shares. The total market value for the company on 31 December 2016 amounted to SEK 6.2 billion, based on the closing price of SEK 171.50. All shares provide the same voting rights and equal rights to the company's profit and capital. The company's Articles of Association do not include any restrictions on how many votes each shareholder can cast at a General Meeting.
The number of shareholders on 31 December 2016 was 9,484 (9,373). On the same date, the ten largest shareholders controlled 63.9 per cent (65.7) of the capital and voting rights and the participation of foreign owners accounted for 43.1 (19.7) per cent of the capital and voting rights.
Shareholders which directly or indirectly represent at least onetenth of the voting rights for all shares in Mekonomen are LKQ Corporation and subsidiaries, whose shareholding on 31 December 2016 amounted to 26.5 per cent (0). For further information on Mekonomen's shares and shareholders, see pages 30–31.
The General Meeting is Mekonomen Group's highest governing body, at which every shareholder is entitled to participate. The Annual General Meeting is to be held within six months of the close of the financial year. The Annual General Meeting approves the income statement and balance sheet, the appropriation of the company's profit, decides on discharge from liability, elects the Board of Directors and auditors, and approves fees, addresses other statutory matters as well as making decisions pertaining to proposals from the Board and shareholders. The company announces the date and location of the Annual General Meeting as soon as the Board has made its decision, but not later than in connection with the third-quarter report. Information pertaining to the location and time is available on the company's website. Shareholders that are registered in Euroclear's shareholders register on the record date and have registered participation in adequate time are entitled to participate in the Annual General Meeting and vote according to their shareholdings. All information concerning the company's meetings, such as registration, entitlement for items to be entered in the agenda in the notification, minutes, etc., is available on the company's website. With regard to participation in the Annual General Meeting, the Board has deemed it is currently not financially justifiable to allow shareholders to participate in the Annual General Meeting through any means other than physical presence. It is the company's aim that the General Meeting be a consummate body for shareholders, in accordance with the intentions of the Swedish Companies Act, which is why the objective is that the Board in its entirety, the representative of the Nomination Committee, the President, auditors and other members of Group Management must always be present at the Meeting.
The Annual General Meeting was held in Stockholm on 12 April 2016. The complete minutes of the Annual General Meeting are available on the Mekonomen website at mekonomen.com. In brief, the Annual General Meeting resolved:
• to adopt proposals for guidelines regarding the composition of the Nomination Committee
On 27 November 2016, Axel Johnson Aktiebolag sold all of its shares in Mekonomen, corresponding to approximately 26.5 per cent of the total number of shares and votes in Mekonomen, to LKQ Corporation. Caroline Berg and Mia Brunell Livfors (Axel Johnson) thereby made their Board seats in Mekonomen available. LKQ Corporation requested at the same time that the Board of Mekonomen convene an Extraordinary General Meeting to appoint new Board members. The Extraordinary General Meeting was held on 10 January 2017 and the Meeting resolved in brief:
In accordance with the guidelines established at the Annual General Meeting on 12 April 2016, Mekonomen Group has established a Nomination Committee. The company is to have a Nomination Committee comprising four members. The four largest shareholders of the company were contacted by the company's Board based on the list of registered shareholders on 31 August 2016 as provided by Euroclear Sweden AB.
On 27 November 2016, LKQ Corporation acquired 26.5 per cent of the total number of shares and votes in Mekonomen from Axel Johnson Aktiebolag. LKQ Corporation is thereafter the largest shareholder in Mekonomen and as a result of this, John S. Quinn, LKQ Corporation, was appointed a member of the Nomination Committee on 16 December 2016.
In connection with this, Caroline Berg, Axel Johnson AB Group, left her post in the Nomination Committee where she had also been the Chairman. Otherwise, the change in ownership gave rise to no changes in the composition of the Nomination Committee.
The Nomination Committee for the 2017 Annual General Meeting is thereby comprised of John S. Quinn, LKQ Corporation, Jonathan Schönbäck, Handelsbanken Fonder, Mats Gustafsson, Lannebo Fonder and Arne Lööw, Fourth Swedish National Pension Fund. In accordance with the guidelines, John S. Quinn has been appointed the Chairman of the Nomination Committee. Mekonomen's Chairman, Kenneth Bengtsson, was co-opted to the Nomination Committee. Fees are not paid to members of the Nomination Committee.
In accordance with the Swedish Corporate Governance Code, the Nomination Committee is to have at least three members, one of whom is to be appointed Chairman. The majority of these members are to be independent in relation to the company and company management and at least one of the Nomination Committee members is to be independent in relation to the company's The Nomination Committee's task is to present proposes to the Annual General Meeting concerning:
In conjunction with its task, the Nominating Committee is to perform the duties incumbent on nomination committees in accordance with the Swedish Corporate Governance Code, and at the request of the Nomination Committee, the company is to provide human resources, such as a secretary function for the Committee, to facilitate its work. If necessary, the company is also to pay reasonable costs for external consultants deemed necessary by the Nomination Committee for it to perform its duties.
Mekonomen Group has not established any specific age limit for Board members or time limits pertaining to the length of time Board members may sit on the Board. Auditors are elected annually when the matter is submitted to the Annual General Meeting.
The Annual General Meeting will be held on 25 April 2017 at 3:00 p.m. at SF Skandia, Drottninggatan 82, Stockholm, Sweden.
According to the Articles of Association, the Board of Directors is to comprise three to seven members and not more than three deputy members. The company's Articles of Association have no specific provisions relating to the appointment and discharge of Board members or amendments to the Articles of Association. The Board of Directors is to be elected annually at the Annual General Meeting.
The Board of Directors shall consist of a well overall mix of the competencies that are important to govern Mekonomen's strategic work in a responsible and successful manner. Examples of such competencies include knowledge of retailing, the automotive industry, corporate governance, compliance to rules and regulations, financing and financial analysis as well as remuneration issues. Earlier Board experience is another important competency.
The Annual General Meeting on 12 April 2016 resolved that the Board was to comprise seven ordinary members with no deputy members. In accordance with the Nomination Committee's suggestion, the Annual General Meeting resolved to re-elect Kenneth Bengtsson (Chairman), Caroline Berg, Kenny Bräck, Malin Persson, Helena Skåntorp and Christer Åberg and to elect Mia Brunell Livfors as a new Board member (Executive Vice Chairman).
All ordinary members are independent in relation to the company and its management in accordance with the definition in the Swedish Corporate Governance Code. Five of the Board members are independent also in relation to major shareholders. The
President is not a member of the Board and neither is any other member of Group Management. A more detailed presentation of the Board members is provided on page 46.
In the opinion of the Nomination Committee, the Board has a suitable composition considering the company's operations, financial position, stage of development and circumstances otherwise. An important starting point for the proposal of Board members was that the Board's composition should reflect and provide space for the different knowledge and experience that the company's strategic development and governance may demand. The Nomination Committee has particularly observed the requirement of diversity and breadth in the Board and the requirement of striving for an even gender distribution. According to the Nomination Committee, the composition is suitable to be able to meet such needs in the company's operations.
The Chairman of the Board, Kenneth Bengtsson, is not employed by the company and does not have any assignments with the company beyond his chairmanship. It is the opinion of the Board that Kenneth Bengtsson ensures that the Board conducts its assignments efficiently and also fulfils its duties in accordance with applicable laws and regulations.
The Board is responsible for the company's organisation and management and is to also make decisions pertaining to strategic issues. The Board held 15 meetings in 2016, of which one was a statutory meeting. The minutes of the meetings were recorded by the Board's secretary, who is the Group's CFO.
Relevant meeting documentation was sent to all members prior to each meeting, which were then held in accordance with the approved agenda. On occasions, other senior executives participated in Board Meetings in a reporting capacity, as necessary. No dissenting opinions to be recorded in the minutes were expressed at any of the meetings during the year. The Board meetings during the year addressed the fixed items of each meeting agenda, such as business situation, financial reporting and investments. Other issues discussed in the Board during the year were strategies, market development, Mekonomen's Swedish operations, the Danish operations and recruitment of a new President. In addition, selected Board meetings discussed issues relating to annual accounts, interim reports and budget.
In accordance with the requirements of the Code, the Board's aim was to devote particular attention to establishing overall goals for
the operations and decide on strategies by which to achieve these goals and to continuously evaluate the operating management, with the aim of ensuring the company's governance, management and control. The Board is responsible for ensuring that suitable systems are in place for the monitoring and control of the company's operations and the risks to the company associated with its operations, that control is implemented of compliance with laws, internal guidelines and other regulations and that the provision of external information is open, objective and relevant. The tasks of the Board also include establishing necessary guidelines for the company's conduct in society with the aim of securing its long-term value-creating ability.
There are written instructions that regulate the internal rules of procedure in the Board and the distribution of assignments between the Board and the President, and for the reporting process. The instructions are reviewed annually and are primarily: the rules of procedure for the Board's work, instructions for the President and authorisation regulations.
The Board evaluates its work every year and it is the duty of the Chairman of the Board to ensure that evaluation is performed. In 2016, the Chairman organised a written questionnaire for all Board members. The collective opinion based on the 2016 evaluation is that the Board's work functioned well and that the Board fulfilled the Code's requirements regarding assignment of the Board.
The Annual General Meeting resolved, in accordance with the proposal from the Nomination Committee, to allocate Board fees amounting to SEK 2,210,000, of which SEK 550,000 to the Chairman of the Board and SEK 310,000 to the Executive Vice Chairman, and SEK 270,000 to each of the other Board members. Furthermore, fees for Committee work are to be paid as follows: SEK 60,000 to the Chairman of the Audit Committee, SEK 35,000 to each of the other members of the Audit Committee, SEK 35,000 to the Chairman of the Remuneration Committee and SEK 25,000 to each of the other members of the Remuneration Committee.
The Board has established a Remuneration Committee and an Audit Committee. The Committees' work mainly comprises preparing issues and providing consultation, although the Board can delegate authority to make decisions in specific cases. The members and Chairmen of the Committees are appointed at the statutory Board meeting held directly after the election of Board members.
The Audit Committee's duties comprise:
Jan Feb March Apr May Jun
• monitoring the company's financial statements and making recommendations and proposals to ensure reporting reliability and to be responsible for the preparation of the Board's work on quality
| • Q4, year-end report. | |
|---|---|
| ------------------------ | -- |
• External auditors' report. • Dividend
• Approval of the annual report. • Proposals to the Annual General Meeting. members.
Statutory Board meeting: • Election of Vice Chairman. • Election of committee • Company signatories. • Q1, interim report. • Board's rules of procedure and instructions for the President • Committees' rules of procedure • Strategy meeting.
Ordinary Board meetings 2016
At each ordinary Board meeting, the Group's position and performance and the outlook for the upcoming quarter were discussed.
assuring the company's financial statements, including making proposal on the "Board's report on internal control" regarding the financial reporting for the respective financial year
The Audit Committee comprises three Board members: Helena Skåntorp (Chairman), Kenneth Bengtsson and Christer Åberg. In 2016, the Audit Committee held four meetings. The respective member's participation is presented in the table on page 47. The Group's external auditors, the Group's CFO and Head of Accounting also participated at the meetings. Since 10 January 2017, John S. Quinn is also a member of the Audit Committee.
The task of the Remuneration Committee is to discuss, decide on and present recommendations on the salaries, other employment terms and incentive programmes for company management. However, the Board in its entirety determines the remuneration and other employment terms for the President. The work of the Remuneration Committee is based on resolutions by the Annual General Meeting pertaining to guidelines for remuneration of senior executives.
Until 12 April 2016, the Remuneration Committee comprised Kenneth Bengtsson, Chairman, Caroline Berg and Malin Persson. From 12 April 2016, the Remuneration Committee comprised Kenneth Bengtsson (Chairman), Malin Persson and Mia Brunell Livfors. The Remuneration Committee held four meetings in 2016, of which two were before 12 April and two after 12 April. The respective member's participation is presented in the table on page 47. The company's president at the time, Magnus Johansson, was also present at two of these meetings. The Group's CFO was the Committee's secretary. Since 10 January 2017, Joseph M. Holsten is a member of the Remuneration Committee. Mia Brunell Livfors withdrew as a member of the Remuneration Committee on 10 January 2017.
The President is appointed and may be discharged by the Board and his work is continuously evaluated by the Board, which occurs without the presence of Group Management.
Magnus Johansson resigned as the President and CEO of Mekonomen Group on 6 October 2016.
Pehr Oscarson is President and CEO of Mekonomen Group since 1 March 2017. Previously, acting President and CEO of Mekonomen Group from 6 October 2016. In addition to his assignment for Mekonomen Group, Pehr is the Vice Chairman of SBF (Sveriges Bilgrossisters Förening - Swedish Automotive Wholesalers' Association), and a Board member of Fresks Holding AB and Oscarson Invest Aktiebolag. Pehr Oscarson has no shareholdings or partial ownership in companies that the Mekonomen Group has significant business ties with.
At 31 December 2016, Group Management consisted of the President and CEO, the Executive Vice President, the CFO, the President of Sørensen og Balchen, the Corporate Supply Chain Director and the Corporate HR Director. A more detailed presentation of Group Management is found on page 47.
It is considered very important to ensure that there is a clear link between remuneration and the Group's values and financial goals in both the short and the long term. The guidelines for remuneration of senior
executives approved by the 2016 Annual General Meeting entail that the company is to offer market-based remuneration that allows the Group to recruit and retain the right executives, and entail that the criteria for determining remuneration is to be based on the significance of work duties and employees' competencies, experience and performance.
Remuneration is to comprise:
The guidelines encompass Group Management, including the President. Remuneration is determined by the Board's Remuneration Committee. However, remuneration of the President is determined by the Board in its entirety.
The President Pehr Oscarson has a fixed cash basic salary per month and a short-term cash variable salary portion, which is based on the company's earnings and individual qualitative parameters and that can amount to a maximum of 33 per cent of the basic annual salary. Pension premiums are payable in an amount that is based on the ITP plan. Other benefits consist of a company car. The period of notice for the President is 12 months if employment is terminated by the company, and six months if terminated by the President. For information on remuneration of the former President Magnus Johansson, see Note 5 on page 65.
The distribution between basic salary and variable remuneration is to be proportionate to the senior executive's responsibilities and authorities. The short-term variable remuneration for other senior executives is based on the Group's earnings and on individual qualitative parameters and can amount to a maximum of a certain percentage of the fixed annual salary. The percentage is linked to the position of each individual and varies between 33 and 60 percentage points for members of Group Management. Other benefits refer primarily to company cars. Pension premiums are paid in an amount that is based on the ITP plan or a corresponding system for employees outside Sweden. Pensionable salary comprises basic salary. The period of notice is 12 months if employment is terminated by the company, and six months if terminated by the employee. Severance pay for termination on the part of the company may amount to a maximum of one annual salary.
At the 2016 Annual General Meeting, it was also resolved that Group Management and a number of selected, business-critical senior executives may receive long-term variable remuneration from the company.
The criteria for determining the variable remuneration portion for each individual is decided by the Board's Remuneration Committee, and for the President by the Board in its entirety. The long-term variable remuneration is to be profit-based and calculated on the Group's earnings for the 2016-2018 financial years. The entire bonus programme, as an expense for the company, is to amount to a maximum of SEK 32 M for the period. Furthermore, an additional requirement to the above is that the average price paid for the Mekonomen share on Nasdaq Stockholm on the last trading day in December 2018 is to exceed the Nasdaq Stockholm PI index for the programme period. The bonus may be realised in whole, in part or not at all depending on the consolidated profit during the duration of the long-term remuneration programme. The right to variable remuneration presupposes that the executive is still employed at the 2019 Annual General Meeting. No bonus was reserved as per 31 December 2016 pertaining to this bonus programme.
In connection with the approval of the remuneration programme by the Annual General Meeting, the earlier programme that ran during the financial years 2014–2016 ceased to apply. No
| 2016 | 2015 | |
|---|---|---|
| PwC | ||
| Fees for audit assignments | 7 | 7 |
| Audit-related services other than the audit assignment | 0 | 1 |
| Tax consultancy | 0 | 0 |
| Other services | 0 | 0 |
| Total fees to PwC1) | 7 | 8 |
1) Including discontinued operations SEK 0 M (1).
payments regarding this programme have been made.
Other than the above, the Board has not decided on any other share or share-price based incentive programs for Group Management.
The auditors are appointed at the Annual General Meeting and are charged with reviewing the company's financial reporting and the Board's and President's management of the company. At the 2016 Annual General Meeting, PricewaterhouseCoopers AB (PwC), with Authorised Public Accountant Lennart Danielsson as Auditor in Charge, was appointed as the auditing firm until the 2017 Annual General Meeting. PwC has an organisation comprising broad and specialised competency that is well-suited to Mekonomen Group's operations and has been the company's auditing firm since 2014.
PwC submits an auditor's report for Mekonomen AB (publ.) and for the company's subsidiaries. The auditors also perform a review of the third-quarter interim report. The audit is conducted in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. The audit of annual report documents for legal entities outside Sweden is conducted in accordance with statutory requirements and other applicable rules in each country.
Under the Swedish Companies Act, the Board shall ensure that the company's organisation is structured so that accounting, financial management and the company's financial affairs otherwise can be adequately controlled. The Swedish Corporate Governance Code ("the Code") clarifies this and prescribes that the Board is responsible for internal control. This report is prepared in accordance the Annual Accounts Act and the Code. The reporting is limited to addressing internal control concerning financial reporting in accordance with the Code, item 7.4.
The Board supervises the quality of the financial reporting through instructions to the President. It is the President's duty, jointly with the Group's CFO, to review and quality-assure all external financial reporting including financial statements, interim reports, annual reports and press releases with financial content, as well as presentation material in connection with meetings with the media, shareholders and financial institutions.
The rules of procedure decided annually by the Board include detailed instructions on, for example, the financial reports and the type of financial information to be submitted to the Board. In addition to financial statements, interim reports and annual reports, the Board examines and evaluates comprehensive financial information that pertains to the Group as a whole and to the various units included in the Group.
The Board also examines, primarily through the Board's Audit Committee, the most significant accounting policies applied to the financial reporting by the Group, and significant changes to policies in the reporting. The Audit Committee's duties also include examining internal and external audit reports regarding internal control and the processes for financial reporting.
The Group's external auditors report to the Board as required, but at least once a year. At least one of these meetings, the President and CFO leave after presenting their formal reports to enable Board members to conduct discussions with auditors without the participation of senior executives. The Group's external auditors also participate at the meetings of the Audit Committee. The Audit Committee reports back to the Board after every meeting. All Audit Committee meetings are minuted and the minutes are available for all Board members and the auditors.
The control environment represents the basis for the internal control over financial reporting. An important part of the control environment is that decision paths, authorities and responsibilities must be clearly defined and communicated between various levels in the organisation and that the control documents are available in the form of internal policies, handbooks, guidelines and manuals. Thus, a key part of the Board's work is to prepare and approve a number of fundamental policies, guidelines and frameworks. These include the Board's rules of procedure, Instructions for the President, Investment policies, Financial policies and the Insider policy. The aim of these policies is to create a basis for sound internal control.
Furthermore, the Board focuses on ensuring that the organisational structure provides distinct roles, responsibilities and processes that benefit the effective management of the operation's risks and facilitate goal fulfilment. Part of the responsibility structure includes an obligation for the Board to evaluate the operation's performance and results on a monthly basis, through appropriate report packages containing income statements, balance sheets, analyses of important key figures, comments pertaining to the business status of each operation and also quarterly forecasts for future periods. The Board has established an Audit Committee to assist the Board specifically in the financial reporting. To help strengthen the internal control, Mekonomen Group has prepared a financial handbook that provides an overall view of existing policies, rules and regulations and procedures within the financial area. This is a living document, which is updated continuously and adapted to internal and external changes. In addition to the financial handbook, there are instructions that provide guidance on daily work in stores and the rest of the organisation, for example, pertaining to stock taking and cash-register reconciliation, etc.
Mekonomen Group conducts continuous surveys of the Group's risks. In these surveys, a number of items are identified in the financial statements and administrative flows and processes where there is an elevated risk of error. The company works continuously on these risks by strengthening controls. Furthermore, risks are addressed in a special forum, including questions related to start-ups and acquisitions. For a more detailed description of risks, refer to Risks and uncertainties in the Administration Report and in Note 37 Financial risks.
Risks of errors in the financial reporting are reduced through a high level of internal control over the financial reporting, with specific focus on significant areas defined by the Board. Within Mekonomen Group, the control structures comprise an organisation with clear roles that enables effective and, from an internal control perspective, suitable division of responsibilities, specific control activities that aim to identify and prevent risks of misstatements in the reporting in time.
Examples of control activities include clear decision-making processes and decision orders for significant decisions, results analyses and other control activities within significant processes. Control activities within these processes are e.g. analytical follow-up, spot checks, account reconciliation, inventory checks in stock and stores and engagement reviews.
In 2016, Mekonomen Group hired the auditing firm Deloitte to conduct the internal audit in the Group. The internal audit functions as an independent and objective assurance and advisory function, which creates value and increases certainty in internal control. This is done by evaluating and proposing improvement in such areas as risk management, compliance with policies and efficiency in the internal control over the financial reporting. The function works throughout the Group. Reporting is done to the Audit Committee, the President and the CFO and information is provided to management in each business area and other units on the results of the audits performed.
Policies and guidelines are particularly important for accurate accounting, reporting and dissemination of information. Policies and guidelines on the financial process are continuously updated at Mekonomen Group. Such updates mainly take place in each Group function for the various operations through e-mails, but also at regular CFO meetings in which representatives from the Group finance function participate. For communication with internal and external parties, a communications policy is in place that states guidelines for conducting communication. The aim of the policy is to ensure that all information obligations are complied with in a correct and complete manner.
The Board continuously evaluates the information submitted by Group Management and auditors. In conjunction with this, the Audit Committee was responsible for the preparation of the Board's work to quality assure the Group's financial reporting. The CEO and CFO hold monthly reviews of financial position with each Head of Operations. Group finance function also cooperates closely with the Group company finance managers and controllers of Group companies on matters pertaining to accounting and reporting. The follow-up and feedback concerning possible deviations arising in the internal controls are a key part of the internal control work, since this is an efficient manner for the company to ensure that errors are corrected and that the control is further strengthened.
| Kenneth Bengtsson | John S. Quinn1) | Kenny Bräck | Joseph M. Holsten1) | Malin Persson | Helena Skåntorp | Christer Åberg |
|---|---|---|---|---|---|---|
| Board position | ||||||
| Chairman of the Board. Chairman of Me konomen's Remunera tion Committee. Mem ber of Mekonomen's Audit Committee. |
Executive Vice Chairman. Member of Mekonomen's Audit Committee. |
Board member. | Board member. Member of Mekonomen's Remuneration Committee. |
Board member. Member of Mekonomen's Remuneration Committee. |
Board member. Chairman of Mekonomen's Audit Committee. |
Board member. Member of Mekonomen's Audit Committee. |
| Education | ||||||
| Upper secondary school education and training in the ICA system. |
M.B.A, Bachelor of Commerce and certified public accountant. |
Upper secondary school education. |
M.B.A, Bachelor of Arts and certified public accountant. |
MSc in Engineering, Chalmers University of Technology. |
Graduate in Business Administration, Stockholm University. |
IHM Business School Stockholm and training courses at Unilever. |
| Elected in | ||||||
| 2013 | 2017 | 2007 | 2017 | 2015 | 2004 | 2014 |
| Born | ||||||
| 1961 | 1958 | 1966 | 1952 | 1968 | 1960 | 1966 |
| Position and Board assignments Chairman of the Board of Ahlsell AB (publ), Clas Ohlson AB (publ), Ersta diakoni, Eurocom merce, Systembolaget, Junior Achievement Sweden and World Childhood Foundation. Member of the Boards of Synsam and Herenco. |
CEO and Managing Director of LKQ Europe. |
Self-employed. Minority owner and Board member of Motorsport Auctions Ltd. Test and Development Driver for McLaren Automotive. |
Executive Chairman of the Board of LKQ Corporation. Member of the Board of Covanta Holding Corporation. |
Member of the Boards of inter alia Getinge AB (publ), HEXPOL AB (publ), Peab AB and Konecranes Plc. |
President of Lernia AB. Member of the Board of ByggPartner i Dalarna Holding AB (publ). Chairman of the Board of a number of Lernia AB subsidiaries, and Chairman of the Board and President of Skåntorp & Co AB. |
Self-employed. Member of the Board of Axfood AB (publ). |
| Work experience | ||||||
| Employed at ICA for more than 30 years, 11 of which as CEO. |
Executive Vice President and CFO of LKQ Cor poration for six years. Senior Vice President, CFO and Treasurer of Casella Waste Systems, Inc., Senior Vice Presi dent of Finance at Allied Waste Industries, Inc. and held several financial and operating roles at Waste Management, Inc. |
Former professional racing driver. |
President and Chief Executive Officer of LKQ Corporation for 13 years. Active for 17 years in the U.S. and international operations of Waste Management, Inc., most recently as Executive Vice President and COO. Prior to that auditor at a public accounting firm. |
President of Volvo Technology AB and the Chalmers University of Technology Foundation. Many years of experience from large Swedish industrial companies, including SKF, ASG and the Volvo Group. |
Former President and CEO of SBC Sveriges BostadsrättsCentrum AB. President and CEO of Jarowskij, CFO of Arla, Authorised Public Accountant at Öhrlings/PwC. |
CEO of Hilding Anders Group. President of Orkla Confectionary & Snacks, President of Arla Foods AB, President of Atria Scandinavia AB, senior positions at Unilever. |
| Total remuneration, SEK | ||||||
| 620,000 Attendance at Board meetings |
86,111 | 270,000 | 81,944 | 295,000 | 330,000 | 305,000 |
| 15/15 | Newly elected in January 2017. |
13/15 | Newly elected in January 2017. |
15/15 | 15/15 | 13/15 |
| Attendance at Audit Committee meetings | ||||||
| 4/4 | Newly elected in January 2017. |
– | – | – | 4/4 | 4/4 |
| Attendance at Remuneration Committee meetings | ||||||
| 4/4 | – | – | Newly elected in January 2017. |
4/4 | – | – |
| 2,000 | Own shareholdings and shareholdings of related parties None. |
1,000 | None. | 1,000 | 2,000 | 2,500 |
| Independent of the company/company management | ||||||
| Yes. | Yes. | Yes. | Yes. | Yes. | Yes. | Yes. |
| Independent of major shareholders | ||||||
| Yes. | No, dependent in relation to major share holders of the company. |
Yes. | No, dependent in relation to major share holders of the company. |
Yes. | Yes. | Yes. |
1) On 27 November 2016, Axel Johnson Aktiebolag sold all of its shares in Mekonomen, corresponding to approximately 26.5 per cent of the total number of shares and votes in Mekonomen, to LKQ Corporation. Caroline Berg and Mia Brunell Livfors (Axel Johnson) thereby made their Board seats in Mekonomen available. LKQ Corporation requested at the same time that the Board of Mekonomen convene an Extraordinary General Meeting to appoint new Board members. An Extraordinary General Meeting was held on 10 January 2017, where Joseph M. Holsten and John S. Quinn were elected to the Board, replacing Caroline Berg and Mia Brunell Livfors.
after the Annual General Meeting. Remuneration for Board and committee work totalled SEK 241,944. Caroline Berg participated in fourteen out of fifteen Board meetings in 2016. Caroline Berg was also a member
of the Remuneration Committee until the 2016 AGM and participated in two of two meetings until the 2016 AGM. Remuneration for Board and committee work totalled SEK 195,000.
Mia Brunell Livfors, who was elected to the Board at the Annual General Meeting on 12 April 2016 participated in ten of the eleven Board meetings in 2016 and two of two meetings of the Remuneration Committee Remuneration and compensation set by the AGM are expensed every calendar year. Remuneration of the new Board members with regard to the period 10 January to 25 April 2017 is accordingly expensed as of 31 December 2016 and therefore presented in the table above.
| Pehr Oscarson | Per Hedblom | Marcus Larsson | Morten Birkeland | Örjan Grandin | Katarina Zetterqvist |
|---|---|---|---|---|---|
| Role | |||||
| President and CEO. | CFO. | Executive Vice President. | President Sørensen og Balchen. |
Supply Chain Director. | HR Director. |
| Born | |||||
| 1963 | 1967 | 1970 | 1964 | 1968 | 1964 |
| Education | |||||
| Technical upper secondary school, supplemented with short economics and management courses. |
MSc in Industrial Engineering and Management, Chalmers University of Technology. MBA INSEAD. |
Master of Economics, School of Economics and Management, Lund University, FEM programme, IFL Sigtuna. |
Degree in Economics, Oslo Business School. |
MSc in Mechanical Engineering, KTH Royal Institute of Technology. |
Bachelor of Science, Organization Sociology, Stockholm University. |
| Employed | |||||
| 2001 | 2007 | 2003 | 2008 | 2016 | 2015 |
| Work experience | |||||
| President of MECA Scandinavia and before that held senior positions in MECA since 2001, President of Swecar AB. |
Partner of Centigo, Associate Director of Arkwright, Consultant at Accenture, Invest in Sweden Agency. |
Self-employed consultant, Head of Purchasing, Head of Business Development at Volkswagen Group. |
Head of Marketing Nordic at Stabburet, Marketing Director and Operations Director at Intersport, Sales Director at Tine, Division Director at NetCom Commercial and Private markets, Group Director of Sales and Marketing ISS. |
Business Area Director Coop Logistik, Partner Minerva Sverige, Vice President Scandiflash, Vice President Supply Chain Q-Med, and other positions in Swedish enterprise, including at Ericsson. |
HR Director Imtech Nordic, HR Manager Coop Sverige, HR Manager Strängbetong. Roles in HR, DHK, FRA and Spånga Tensta City District Administration. |
| Board appointments | |||||
| Deputy Chairman of Association of Swedish Wholesalers of Automotive Parts and Accessories (SBF). Member of the Board of Fresks Holding AB and Oscarson Invest Aktiebolag. |
Chairman of the Boards of Lasingoo Sverige AB and Automotive Web Solutions AB. Board member of Intermeko Europe. |
||||
| Own shareholdings and shareholdings of related parties | |||||
| 2,000 | 1,000 | 3,000 | 0 | 0 | 0 |
The Board of Mekonomen Group appointed Pehr Oscarson the acting President and CEO in connection with Magnus Johansson leaving as the President and CEO on 6 October 2016. After the end of the financial year, the Board appointed Pehr Oscarson as the President and CEO, effective as of 1 March 2017.
Örjan Grandin joined Group Management as of 1 March 2016 and Katarina Zetterqvist joined Group Management as of 11 May 2016. David Larsson, COO, resigned his position in Mekonomen Group in the third quarter of 2016.
| SEK M | Note | 2016 | 2015 |
|---|---|---|---|
| Continuing operations: | |||
| Net sales | 3 | 5,786 | 5,624 |
| Other operating revenue | 151 | 137 | |
| Total revenue | 5,937 | 5,761 | |
| Operating expenses | |||
| Goods for resale | 17 | -2,686 | -2,529 |
| Other external costs | 4 | -1,229 | -1,167 |
| Personnel costs | 5 | -1,366 | -1,282 |
| EBITDA | 656 | 784 | |
| Depreciation and impairment of tangible fixed assets | 6 | -62 | -57 |
| EBITA | 594 | 726 | |
| Amortisation and impairment of intangible fixed assets | 6 | -113 | -110 |
| Operating profit (EBIT) | 9 | 481 | 616 |
| Financial income and expenses | |||
| Interest income | 5 | 6 | |
| Interest expenses | -28 | -33 | |
| Other financial items | 9 | -12 | 5 |
| Profit after financial items | 446 | 594 | |
| Tax on profit for the year | 10 | -105 | -164 |
| Profit for the year from continuing operations | 342 | 430 | |
| Discontinued operations: | |||
| Profit for the year from discontinued operations | 34 | 0 | 0 |
| Profit for the year | 342 | 430 | |
| Profit for the year attributable to: | |||
| Parent Company's shareholders | 335 | 423 | |
| Non-controlling interests | 7 | 8 | |
| Total profit for the year | 342 | 430 | |
| Earnings per share attributable to Parent Company's shareholders | |||
| - Profit from continuing operations, SEK | 9.32 | 11.77 | |
| - Profit from discontinued operations, SEK | 0.00 | 0.00 | |
| Earnings per share, SEK1) | 9.32 | 11.77 | |
| Average number of shares1) | 35,901,487 | 35,901,487 |
1) No dilution is applicable. For further information on data per share, refer to pages 30-31.
| SEK M | Note | 2016 | 2015 |
|---|---|---|---|
| Profit for the year | 342 | 430 | |
| Other comprehensive income: | |||
| Components that will not be reclassified to profit for the year: | |||
| - Actuarial gains and losses | -1 | 2 | |
| Components that may later be reclassified to profit for the year: | |||
| - Exchange-rate differences on translation of foreign subsidiaries | 105 | -88 | |
| - Cash-flow hedging1) | -4 | -1 | |
| Total other comprehensive income, net after tax2) | 100 | -87 | |
| Comprehensive income for the year | 442 | 343 | |
| Comprehensive income for the year attributable to | |||
| Parent Company's shareholders | 434 | 336 | |
| Non-controlling interests | 8 | 7 | |
| Comprehensive income for the year | 442 | 343 | |
| Total comprehensive income attributable to Parent Company shareholders has arisen from | |||
| - Continuing operations | 431 | 337 | |
| - Discontinued operations | 3 | -1 | |
| 434 | 336 |
1) Holding of financial interest rate derivatives for hedging purposes, valued according to level 2 defined in IFRS 13.
2) For information about tax recognised directly against items in other comprehensive income, refer to Note 15.
| SEK M | Note | 31 Dec. 2016 | 31 Dec. 2015 |
|---|---|---|---|
| ASSETS | |||
| Fixed assets | |||
| Intangible fixed assets | 12 | ||
| Goodwill | 1,883 | 1,835 | |
| Brands | 327 | 322 | |
| Franchise contracts | 19 | 21 | |
| Customer relations | 415 | 467 | |
| Capitalised expenditure for IT systems | 113 | 88 | |
| Total intangible fixed assets | 2,757 | 2,734 | |
| Tangible fixed assets | |||
| Improvement costs, third-party property | 13 | 27 | 33 |
| Equipment and transport | 14 | 154 | 148 |
| Total tangible fixed assets | 181 | 182 | |
| Financial fixed assets | |||
| Deferred tax assets | 15 | 77 | 55 |
| Investments accounted for using the equity method | 27 | 2 | 2 |
| Other financial fixed assets | 11, 16 | 44 | 49 |
| Total financial fixed assets | 123 | 106 | |
| Total fixed assets | 3,061 | 3,022 | |
| Current assets | |||
| Goods for resale | 17 | 1,279 | 1,226 |
| Current receivables | 11, 18, 19 | 821 | 818 |
| Cash and cash equivalents | 11, 20 | 291 | 295 |
| Total current assets | 2,391 | 2,339 | |
| TOTAL ASSETS | 5,452 | 5,361 | |
| SEK M | Note | 31 Dec. 2016 | 31 Dec. 2015 |
|---|---|---|---|
| SHAREHOLDERS' EQUITY AND LIABILITIES | |||
| Shareholders' equity | 28 | ||
| Share capital | 90 | 90 | |
| Other capital contributions | 1,456 | 1,456 | |
| Reserves | -134 | -234 | |
| Profit brought forward including profit for the year | 900 | 831 | |
| Total shareholders' equity attributable to Parent Company's shareholders | 2,311 | 2,143 | |
| Non-controlling interests | 14 | 12 | |
| Total shareholders' equity | 2,324 | 2,155 | |
| Long-term liabilities | |||
| Liabilities to credit institutions, interest-bearing | 11, 21 | 1,334 | 1,466 |
| Deferred tax liabilities | 15 | 163 | 169 |
| Provisions | 22 | 27 | 10 |
| Total long-term liabilities | 1,524 | 1,645 | |
| Current liabilities | |||
| Liabilities to credit institutions, interest-bearing | 11, 21 | 404 | 461 |
| Tax liabilities | 94 | 95 | |
| Other current liabilities, non-interest-bearing | 11, 23, 24 | 1,105 | 990 |
| Provisions | 22 | 0 | 14 |
| Total current liabilities | 1,603 | 1,560 | |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 5,452 | 5,361 |
| SEK M | Share capital |
Other capital contribu tions |
Reserves | Profit brought forward |
Total attribu table to Parent Company shareholders |
Non controlling interest |
Total share holders' equity |
|---|---|---|---|---|---|---|---|
| OPENING BALANCE ON 1 JANUARY 2015 | 90 | 1,456 | -145 | 665 | 2,066 | 14 | 2,080 |
| Comprehensive income for the year: | |||||||
| Profit for the year | 423 | 423 | 8 | 430 | |||
| Other comprehensive income: | |||||||
| Components that will not be reclassified to profit for the year: |
|||||||
| - Actuarial gains and losses | 2 | 2 | 2 | ||||
| Components that may later be reclassified to profit for the year: |
|||||||
| - Exchange-rate differences on translation of foreign subsidiaries |
-88 | -88 | 0 | -88 | |||
| - Cash-flow hedging1) | -1 | -1 | -1 | ||||
| Total other comprehensive income, net after tax2) | -89 | 2 | -87 | 0 | -87 | ||
| Comprehensive income for the year | -89 | 424 | 335 | 7 | 343 | ||
| Dividends | -251 | -251 | -9 | -261 | |||
| Acquisition/divestment of non-controlling interests | -7 | -7 | 0 | -7 | |||
| CLOSING BALANCE ON 31 DECEMBER 2015 | 90 | 1,456 | -234 | 831 | 2,143 | 12 | 2,155 |
| OPENING BALANCE ON 1 JANUARY 2016 | 90 | 1,456 | -234 | 831 | 2,143 | 12 | 2,155 |
| Comprehensive income for the year: | |||||||
| Profit for the year | 335 | 335 | 7 | 342 | |||
| Other comprehensive income: | |||||||
| Components that will not be reclassified to profit for the year: |
|||||||
| - Actuarial gains and losses | -1 | -1 | -1 | ||||
| Components that may later be reclassified to profit for the year: |
|||||||
| - Exchange-rate differences on translation of foreign subsidiaries |
104 | 104 | 1 | 105 | |||
| - Cash-flow hedging1) | -4 | -4 | -4 | ||||
| Total other comprehensive income, net after tax2) | 100 | -1 | 99 | 1 | 100 | ||
| Comprehensive income for the year | 100 | 334 | 434 | 8 | 442 | ||
| Dividends | -251 | -251 | -8 | -259 | |||
| Acquisition/divestment of non-controlling interests | -14 | -14 | 1 | -14 | |||
| CLOSING BALANCE ON 31 DECEMBER 2016 | 90 | 1,456 | -134 | 900 | 2,311 | 14 | 2,324 |
1) Holding of financial interest rate derivatives for hedging purposes, valued according to level 2 defined in IFRS 13.
2) For information about tax recognised directly against items in other comprehensive income, refer to Note 15.
| SEK M | Note | 2016 | 2015 |
|---|---|---|---|
| Operating activities | |||
| Profit after financial items | 446 | 594 | |
| Adjustments for items not affecting liquidity | 30 | 196 | 188 |
| 642 | 782 | ||
| Tax paid | -153 | -189 | |
| Cash flow from operating activities before changes in working capital | 489 | 594 | |
| Cash flow from changes in working capital | |||
| Decrease (+) / increase (-) in inventories | -40 | -19 | |
| Decrease (+) / increase (-) in receivables | 33 | -11 | |
| Decrease (-) / increase (+) in liabilities | 61 | -124 | |
| Increase (-) / decrease (+) in working capital | 54 | -154 | |
| Cash flow from operating activities | 544 | 439 | |
| Investments | |||
| Acquisition of subsidiaries and operations | 31 | -17 | -67 |
| Divestment of subsidiaries and operations | 29 | 9 | |
| Acquisition of tangible fixed assets | 13.14 | -58 | -48 |
| Divestment of tangible fixed assets | 0 | 8 | |
| Acquisition of intangible fixed assets | 12 | -53 | -55 |
| Acquisition/sale of participations in associated companies and joint ventures | 27 | 0 | 2 |
| Purchase of financial fixed assets | -3 | 0 | |
| Increase (-) / decrease (+) of long-term receivables | 8 | 5 | |
| Cash flow from investing activities | -94 | -146 | |
| Financing activities | |||
| Acquisition of non-controlling interests | 31 | -14 | -17 |
| Divestment of non-controlling interests | 31 | 0 | 9 |
| Change in overdraft facilities | -58 | -32 | |
| Loans raised | 21 | – | 202 |
| Amortisation of loans | -136 | -148 | |
| Dividends paid | -259 | -261 | |
| Cash flow from financing activities | -466 | -245 | |
| Cash flow for the year | -16 | 48 | |
| Cash and cash equivalents at the beginning of the year | 295 | 258 | |
| Exchange-rate differences in cash and cash equivalents | 12 | -11 | |
| Cash and cash equivalents at year-end | 20 | 291 | 295 |
Cash flow pertains to total operations, i.e. both continuing and discontinued operations. Interest received amounted to SEK 5 M (6) and interest paid amounted to SEK 28 M (33).
| SEK M | Note | 2016 | 2015 |
|---|---|---|---|
| Net sales | 3, 32 | 34 | 34 |
| Other operating revenue | 50 | 44 | |
| Total revenue | 84 | 78 | |
| Operating expenses | |||
| Goods for resale | -4 | -4 | |
| Other external costs | 4 | -73 | -80 |
| Personnel costs | 5 | -44 | -46 |
| Depreciation/amortisation of tangible and intangible fixed assets | 6 | 0 | 0 |
| EBIT | -38 | -52 | |
| Financial income and expenses | |||
| Result from participations in Group companies | 7 | 19 | 454 |
| Interest income | 24 | 28 | |
| Interest expenses | -27 | -35 | |
| Other financial items1) | 9 | -17 | 6 |
| Profit after financial items | -38 | 401 | |
| Appropriations | 8 | 156 | 226 |
| Profit before tax | 118 | 627 | |
| Tax on profit for the year | 10 | 0 | -37 |
| Profit for the year | 118 | 589 |
| SEK M | Note | 2016 | 2015 |
|---|---|---|---|
| Profit for the year | 118 | 589 | |
| Other comprehensive income, net after tax1) | – | – | |
| Comprehensive income for the year | 118 | 589 |
1) Exchange-rate differences regarding net investments in foreign operations of SEK 4 M (-3) are recognised in the income statement instead of comprehensive income in accordance with the amendment to RFR 2 as of 1 January 2016; comparative figures are recalculated.
| SEK M | Note | 31 Dec. 2016 | 31 Dec. 2015 |
|---|---|---|---|
| ASSETS | |||
| Fixed assets | |||
| Tangible fixed assets | |||
| Improvement costs, third-party property | 13 | 0 | 0 |
| Equipment and transport | 0 | 0 | |
| Total tangible fixed assets | 0 | 1 | |
| Financial fixed assets | |||
| Participations in Group companies | 26 | 3,012 | 3,004 |
| Receivables from Group companies | 99 | 85 | |
| Deferred tax assets | 15 | 79 | 57 |
| Total financial fixed assets | 3,190 | 3,146 | |
| Total fixed assets | 3,190 | 3,147 | |
| Current assets | |||
| Current receivables | |||
| Accounts receivable | 8 | 10 | |
| Receivables from Group companies | 1,242 | 1,583 | |
| Tax assets | 56 | 36 | |
| Other receivables | 7 | 12 | |
| Prepaid expenses and accrued income | 19 | 7 | 10 |
| Total current receivables | 1,319 | 1,650 | |
| Cash and cash equivalents | 20 | 163 | 210 |
| Total current assets | 1,482 | 1,860 | |
| TOTAL ASSETS | 4,673 | 5,007 |
| SEK M | Note | 31 Dec. 2016 | 31 Dec. 2015 |
|---|---|---|---|
| SHAREHOLDERS' EQUITY AND LIABILITIES | |||
| Shareholders' equity | 28 | ||
| Restricted shareholders' equity | |||
| Share capital | 90 | 90 | |
| Statutory reserve | 3 | 3 | |
| Total restricted shareholders' equity | 93 | 93 | |
| Non-restricted shareholders' equity | |||
| Profit brought forward | 2,431 | 2,090 | |
| Profit for the year | 118 | 592 | |
| Total non-restricted shareholders' equity | 2,549 | 2,682 | |
| Total shareholders' equity | 2,642 | 2,775 | |
| Untaxed reserves | 210 | 175 | |
| Provisions | 22 | 2 | 2 |
| Long-term liabilities | |||
| Liabilities to credit institutions | 21 | 1,324 | 1,460 |
| Total long-term liabilities | 1,324 | 1,460 | |
| Current liabilities | |||
| Overdraft facilities | 21 | 265 | 323 |
| Other liabilities to credit institutions | 21 | 136 | 136 |
| Accounts payable | 2 | 4 | |
| Liabilities to Group companies | 69 | 117 | |
| Other liabilities | 1 | 1 | |
| Accrued expenses and deferred income | 24 | 22 | 15 |
| Total current liabilities | 495 | 596 | |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 4,673 | 5,007 |
| Restricted shareholders' equity |
Non-restric ted sharehol ders' equity |
|||
|---|---|---|---|---|
| SEK M | Share capital | Statutory reserve |
Profit brought forward |
Total share holders' equity |
| OPENING BALANCE ON 1 JANUARY 2015 | 90 | 3 | 2,344 | 2,437 |
| Profit for the year | 589 | 589 | ||
| Other comprehensive income1) | – | |||
| Comprehensive income for the year | 589 | 589 | ||
| Transactions with shareholders | ||||
| Dividends | -251 | -251 | ||
| Total transactions with shareholders | -251 | -251 | ||
| CLOSING BALANCE ON 31 DECEMBER 2015 | 90 | 3 | 2,682 | 2,775 |
| OPENING BALANCE ON 1 JANUARY 2016 | ||||
| Profit for the year | 90 | 3 | 2,682 | 2,775 |
| Other comprehensive income1) | 118 | 118 – |
||
| Comprehensive income for the year | 118 | 118 | ||
| Transactions with shareholders | ||||
| Dividends | -251 | -251 | ||
| Total transactions with shareholders | -251 | -251 | ||
| CLOSING BALANCE ON 31 DECEMBER 2016 | 90 | 3 | 2,549 | 2,642 |
The number of shares as at 31 December 2016 amounted to 35,901,487 (35,901,487) with a quotient value of SEK 2.50 (2.50) per share.
1) Exchange-rate differences regarding net investments in foreign operations of SEK 4 M (-3) are recognised in the income statement instead of comprehensive income in accordance with the amendment to RFR 2 as of 1 January 2016; comparative figures are recalculated.
| SEK M | Note | 2016 | 2015 |
|---|---|---|---|
| Operating activities | |||
| Profit after financial items | -38 | 401 | |
| Adjustments for items not affecting liquidity | 30 | 21 | 37 |
| -17 | 438 | ||
| Tax paid | -42 | -81 | |
| Cash flow from operating activities before changes in working capital | -59 | 357 | |
| Cash flow from changes in working capital | |||
| Decrease (+) / increase (-) in receivables | 599 | -49 | |
| Decrease (-) / increase (+) in liabilities | -99 | -2 | |
| Increase (-) / decrease (+) in working capital | 500 | -51 | |
| Cash flow from operating activities | 441 | 306 | |
| Investments | |||
| Capital contributions paid | 26 | -35 | -9 |
| Acquisition of tangible fixed assets | 13 | 0 | 0 |
| Increase (-) / decrease (+) in long-term receivables | -8 | -30 | |
| Cash flow from investing activities | -43 | -39 | |
| Financing activities | |||
| Change in overdraft facilities | -58 | -32 | |
| Loans raised | 21 | 0 | 200 |
| Amortisation of loans | -136 | -136 | |
| Dividends paid | -251 | -251 | |
| Cash flow from financing activities | -445 | -219 | |
| Cash flow for the year | -47 | 48 | |
| Cash and cash equivalents at the beginning of the year | 210 | 162 | |
| Cash and cash equivalents at year-end | 20 | 163 | 210 |
Profit after financial items includes dividends received from subsidiaries of SEK 47 M (489). Interest received amounted to SEK 24 M (28) and interest paid amounted to SEK 27 M (35).
The most important accounting policies that were applied to the preparation of these consolidated financial statements are stated below. These policies were consistently applied for all years presented, unless otherwise stated.
The consolidated financial statements were prepared in accordance with the Annual Accounts Act, International Financial Reporting Standards (IFRS) as approved by the EU and interpretations issued by the IFRS Interpretations Committee that apply for financial years beginning on 1 January 2016. Furthermore, the Swedish Financial Reporting Board's recommendation RFR 1 Supplementary Accounting Regulations for Groups was applied.
The functional currency of the Parent Company is Swedish kronor (SEK), which is also the Group's presentation currency. All amounts are stated in SEK M, unless otherwise stated.
The items in the Annual Report are measured at cost, with the exception of certain financial instruments, which are measured at fair value.
The Parent Company's financial statements were prepared in accordance with the Annual Accounts Act and RFR 2 Accounting for legal entities.
Preparing financial statements in accordance with IFRS requires the use of certain key estimates for accounting purposes. Furthermore, management is required to make certain assessments in the application of the consolidated accounting policies. The areas that include a high degree of complicated assessments or areas where assumptions and estimates are of material significance to the consolidated financial statements are stated in Note 2.
The Group applies a number of new standards and interpretations as of 1 January 2016. None of the new standards and interpretations applied by Mekonomen Group as of 1 January 2016 has had any significant impact on the consolidated financial statements.
A number of new standards and amendments of interpretations and existing standards come into effect for financial years beginning on 1 January 2016 and were not applied in the preparation of the consolidated financial statements. The most important amendments for Mekonomen Group are:
IFRS 15 Revenue from Contracts with Customers regulates how revenue is to be recognised. The principles on which IFRS 15 is based are to provide users of financial statements with more informative, relevant disclosures of the company's revenue. The expanded disclosure requirements entail that information is to be provided about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer. Under IFRS 15, revenue is to be recognised when the customer controls the sold good or service and can use and obtain the benefits from the good or service.
IFRS 15 replaces IAS 18 Revenue and IAS 11 Construction Contracts, and associated SICs and IFRICs. IFRS 15 will come into effect on 1 January 2018. As a transition method, companies can choose between "full retroactivity" or prospective application with additional disclosures.
During the year, the Group's revenue flows were mapped and the evaluation of the effects began. The initial assessment is that the application is not expected to entail any material impact on the recognition of the Group's revenue. The evaluation of the effects is expected to be completed in 2017. The Group has not yet decided on the method in the transition to the new standard.
The standard addresses the classification, measurement and recognition of financial assets and financial liabilities. It replaces the parts of IAS 39 that addressed the classification and measurement of financial instruments and introduces a new impairment model. The new standard requires more disclosures on expected credit losses from financial instruments and risk management in hedge accounting. The standard is to be applied to financial years beginning on or after 1 January 2018.
Even if the Group has not yet done a detailed evaluation of the effects of the new standard, the introduction of IFRS 9 is not expected to have any material impact on the classification and measurement of the Group's financial assets and liabilities.
In January 2016, IASB published a new leasing standard that will replace IAS 17 Leases and associated interpretations IFRIC 4, SIC-15 and SIC-27. The standard requires that assets and liabilities attributable to all leases, with a few exceptions, are recognised in the balance sheet. This recognition is based on the view that the lessee has a right to use an asset during a specific time period and at the same time an obligation to pay for this right. The recognition for the lessor will essentially remain unchanged. The standard is to be applied to financial years beginning on or after 1 January 2019. Early adoption is permitted. The Group has not yet evaluated the effects of IFRS 16,
but assesses that it can be expected to have a material impact on total assets. Other new standards, amendments or interpretations of existing standards that have not come into effect are not relevant to the Group at present or are deemed to not have any material effect on the Group's earnings or financial position.
The consolidated financial statements include the Parent Company and all companies (including structured companies) over which the Parent Company has a controlling influence. The Group controls a company when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over a company. Subsidiaries are included in the consolidated financial statements from the point in time at which controlling influence is achieved and excluded from the consolidated financial statements from the point in time at which the controlling influence ceases.
The purchase method was used for recognising the Group's business combinations. The purchase consideration for the acquisition of a subsidiary is measured at fair value on transferred assets, liabilities arising in the Group from previous owners of the acquired company and the shares issued by the Group. The purchase consideration also includes the fair value of all assets or liabilities resulting from an agreement on contingent consideration. Identifiable acquired assets and assumed liabilities in a business combination are initially measured at fair value on the date of acquisition. For each acquisition - meaning, acquisition by acquisition - the Group decides whether the non-controlling interests in the acquired company are measured at fair value or proportionate to the holding's share of the carrying amount of the acquired company's identifiable net assets.
Acquisition-related costs are recognised in profit or loss as they arise.
If the business combination is a step acquisition, the earlier equity shares in the acquired company are re-measured to its fair value on the date of acquisition. Any gains or losses arising are recognised in profit or loss.
Each contingent consideration to be transferred by the Group is measured at fair value on the date of acquisition. The subsequent changes in fair value of contingent consideration are recognised in profit or loss. Contingent consideration classified as shareholders' equity is not re-measured and the subsequent adjustment is recognised in shareholders' equity.
Goodwill is initially measured at the amount by which the total purchase consideration and fair value for the non-controlling interests exceeds the fair value of identifiable acquired assets and assumed liabilities. If the purchase consideration is lower than the fair value of the acquired company's net assets, the difference is recognised directly in profit or loss.
Where necessary, subsidiaries' accounting is adjusted to comply with the same policies applied by the other Group companies. All internal transactions between Group companies and Group intermediaries are eliminated when preparing the consolidated financial statements.
Transactions with non-controlling interests that will not result in a loss of control are recognised as shareholders' equity transactions – meaning, transactions with shareholders in their roles as owners. In acquisitions from non-controlling interests, the difference between the fair value of purchase consideration paid and the actual acquired portion of the carrying amount of the subsidiary's net assets is recognised in shareholders' equity. Profits or losses from divestments to non-controlling interests are also recognised in shareholders' equity.
When the Group no longer has controlling influence, each remaining holding is measured at fair value on the date controlling influence ceases. The change in the carrying amount is recognised in profit or loss. The fair value is used as the initial carrying amount and is the basis for continued recognition of the remaining holding in associated companies, joint ventures or financial assets. All amounts pertaining to the divested unit previously recognised in other comprehensive income are recognised as if the Group had directly divested the assets or liabilities in question. This may result in the amount previously recognised in other comprehensive income being reclassified to profit or loss.
Associated companies are all companies over which the Group has significant influence but not control, generally accompanying a shareholding of between 20 per cent and 50 per cent of the voting rights. Investments in associated companies are recognised using the equity method. Mekonomen Group has only one small associated company with a marginal impact on the Group.
Under IFRS 11, holdings in a joint arrangement are to be classified as either a joint operation or a joint venture depending on each investor's contractual rights and obligations. Mekonomen Group has only one small joint arrangement with a marginal impact on the Group and has determined that it is a joint venture. Joint ventures are recognised in accordance with the equity method.
Transactions in foreign currencies are translated into Swedish Kronor (SEK) based on the exchange rate on the date of the transaction. Monetary items (assets and liabilities) in foreign currencies are translated into SEK according to the exchange rate on the balance-sheet date. Exchange-rate gains and losses that arise in connection with such translations are recognised in profit or loss as Other operating revenue and/or Other operating expenses. Exchange-rate differences that arise in foreign long-term loans and liabilities, and in the translation of bank accounts in currencies other than the accounting currency, are recognised in financial income and expenses.
When the consolidated financial statements were prepared, the Group's foreign operations' balance sheets were translated from their functional currencies to SEK based on the exchange rates on the balance-sheet date. The income statements and other comprehensive income were translated at the average exchange rate for the period. Translation differences that arose were recognised in other comprehensive income against the translation reserve in shareholders' equity. The accumulated translation differences were transferred and recognised as part of capital gains or capital losses in cases where foreign operations were divested. Goodwill and adjustments to fair values attributable to acquisitions of operations using functional currencies other than SEK are treated as assets and liabilities in the acquired operations' currencies and translated at the exchange rates on the balance-sheet date.
Operating segments are reported to correspond with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is the function responsible for the allocation of resources and assessing the earnings of the operating segments. In the Group, this function has been identified as the company's President and CEO.
Revenue from external customers derives primarily from the sale of goods, representing approximately 96 per cent (96) of net sales. The remaining net sales derive from workshop services, as well as annual and license fees to affiliated stores and workshops.
Sales of goods are recognised at delivery/handover of products to the customer, in accordance with conditions of sale. Sales are recognised net after deduction of discounts, returns and value-added tax.
Revenue from the sale of workshop services is recognised in the period in which the service took place. Revenue is recognised based on the degree of completion on the balance-sheet date (percentage of completion).
Revenue from licensing agreements is allocated over the term of the agreement. Other operating revenue mainly comprises of rental income, marketing subsidies and exchange-rate gains.
Interest income is recognised over the term by applying the effective interest method.
A financial lease agreement is an agreement according to which the financial risks and benefits associated with ownership of an object are essentially transferred from the lessor to the lessee. Leasing objects mainly comprise company vehicles and distribution vehicles.
Operating leases primarily comprise leased premises.
Assets held under financial lease agreements are measured as fixed assets in the consolidated balance sheets at fair value at the beginning of the leasing period or at the present value of minimum leasing fees if this is lower. The liability that the lessee has to the lessor is recognised in the balance sheet under the heading "Lease agreement" divided into long-term and short-term liabilities. Leasing payments are divided between interest and amortisation of liabilities. Interest is divided over the leasing period so that each reporting period is charged with an amount corresponding to a fixed interest rate of the liability recognised during each period. Interest expenses are recognised directly in profit or loss. Lease fees that are paid during operating lease agreements are systematically expensed over the leasing period.
The Group has both defined-contribution and defined-benefit pension plans. A defined-benefit pension plan is a pension plan whereby the Group guarantees an amount, which the employee receives as pension benefits upon retirement, normally based on several different factors, for example, salary and period of service. A defined-contribution pension plan is a pension plan in which the Group, after having paid its pension premium to a separate legal entity, has fulfilled its commitments towards the employee.
Defined-contribution plans are recognised as an expense in the period to which the premiums paid are attributable.
Pension expenses for defined-benefit plans are calculated using the Projected Unit Credit Method whereby expenses are distributed over the employee's period of employment. These commitments, meaning the liabilities that are recognised, are measured at the present value of expected future payments, taking estimated future salary increases into account, applying a discount rate corresponding to the interest
on first-class corporate bonds issued in the same currency as the pension is to be paid in, with a remaining duration that is comparable to the current commitment and with deductions for the fair value of plan assets. In countries where there are no functioning markets for corporate bonds, a discount rate corresponding to the interest rate on mortgage bonds is used. Consequently, a discount rate established by referring to the interest rate on mortgage bonds is used for the Group's defined-benefit pension plans in Norway. The most important actuarial assumptions are stated in Note 22. If a net asset arises, it is be recognised only to the extent that it represents future financial benefits, for example, in the form of repayments or reduced future premiums.
One of the Group's defined-benefit pension plans comprises a so-called multi-employer defined-benefit pension plan (ITP plan in Alecta). In accordance with Mekonomen Group's accounting policies, a multi-employer defined-benefit plan is recognised based on the rules of the plans and recognises its proportional share of the defined-benefit pension obligations and of plan assets and expenses related to the plan in the same manner as for any other similar defined-benefit pension plan. However, Alecta has not been able to present sufficient information to facilitate reporting as a defined-benefit plan, which is why the ITP plan is recognised as a defined-contribution plan in accordance with IAS 19.34.
In addition to the defined-benefit pension plans via Alecta described above, the Group has defined-benefit pension plans for employees in Norway. Actuarial gains and losses on the defined-benefit pension plans for employees in Norway are recognised in their entirety over comprehensive income in the period in which they arise.
Remuneration in connection with termination of employment can be paid when an employee has been served notice of termination prior to the expiration of the normal date of retirement or when an employee accepts voluntary retirement. The Group recognises liabilities and expenses in connection with a termination of employment, when Mekonomen Group is unquestionably obligated to either terminate employment prior to the normal termination date or to voluntarily pay remuneration to encourage early retirement.
Mekonomen Group recognises a liability and an expense for bonuses when there are legal or informal obligations, based on earlier practice, to pay bonuses to employees.
The Group's total tax expense comprises current tax and deferred tax. Current tax is tax that is to be paid or received pertaining to the current year and adjustments of prior years' current tax. Deferred tax is calculated based on the difference between the carrying amounts and the values for tax purposes of company assets and liabilities. Deferred tax is recognised according to the balance-sheet method. Deferred tax liabilities are recognised in principle on all taxable temporary differences, while deferred tax assets are recognised to the extent that is probable that the amount can be utilised against future taxable surplus.
The carrying amount on deferred tax assets is assessed at each accounting yearend and reduced to the extent that it is no longer probable that sufficient taxable surplus will be available to be utilised either in its entirety or partially against the deferred tax asset.
Deferred tax is calculated based on the tax rates that are expected to apply for the period when the asset is recovered or the debt settled. Deferred tax is recognised as revenue or expenses in profit or loss, except in cases when it pertains to transactions or events that are recognised against other comprehensive income or directly against shareholders' equity. The deferred tax is then also recognised against other comprehensive income or directly against shareholders' equity. Deferred tax assets and tax liabilities are offset when they are attributable to income tax that is charged by the same authority and when the Group intends to pay the tax with a net amount.
A discontinued operation is a part of a company that has either been divested, is no longer used or is classified as being held for sale and that the operation represents an independent operating segment or a significant operation within a geographic area or is a subsidiary acquired solely for the purpose of being sold on. Classification as a discontinued operation takes place upon divestment or at an earlier point in time when the operation meets the criteria to be classified as being held for sale. Profit after tax from discontinued operations is recognised on a separate line in the income statement. When an operation is classified as a discontinued operation, the format of the comparison year's income statement is changed so that it is presented as if the discontinued operation had been discontinued at the opening of the comparison year. The format of the statement of financial position for the current and previous years is not changed correspondingly. The discontinued operation's cash flows are included in the consolidated cash flow statement. All notes to the income statement refer to continuing operations unless otherwise stated. For further description and separate financial information on discontinued operations, refer to Note 34.
Goodwill is initially measured at the amount by which the total purchase consideration and fair value for the non-controlling interests exceeds the fair value of identifiable acquired assets and assumed liabilities. If the purchase consideration is lower
than the fair value of the acquired company's net assets, the difference is recognised directly in profit or loss. Goodwill has an indefinite useful life and is recognised at cost less any accumulated impairment. In the divestment of an operation, the portion of goodwill attributable to this operation is recognised in the calculation of gain or loss on the divestment.
Expenditure for the development and implementation of IT systems can be capitalised if it is probable that future financial benefits will accrue to the company and the cost for the asset can be calculated in a reliable manner.
Brands, customer relations and franchise contracts acquired through business combinations are measured at fair value on the date of acquisition.
Acquired brands attributable to the acquisitions of Sørensen og Balchen and MECA have been deemed to have an indefinite useful life and are recognised at cost less any accumulated impairment losses. Customer relations, other brands, franchise contracts and strategic IT investments have definite useful lives and are recognised at cost less accumulated amortisation. Amortisation is applied according to the straight-line method over the assets' estimated useful life. Customer relations, other
brands and franchise contracts are deemed to have a useful life of five to ten years. IT investments are deemed to have a useful life of three to ten years from the start of operation.
Tangible fixed assets are recognised as assets in the balance sheet if it is probable that future financial benefits will be accrued to the company and the cost of the asset can be calculated in a reliable manner. Tangible fixed assets, primarily comprising equipment, computers and transport, are recognised at cost less accumulated depreciation and any impairment. Depreciation of tangible fixed assets is recognised as an expense so that the asset's value is depreciated according to the straight-line method over its estimated useful life.
The following percentages were applied for depreciation:
| Fixed assets | % |
|---|---|
| Improvement costs, third-party property1) | 10 |
| Equipment | 10–20 |
| Vehicles | 20 |
| Servers | 20 |
| Workplace computers | 33 |
1) Depreciation takes place over the shorter period corresponding to 10 per cent per year and the remaining duration of the contract.
The residual value of assets and useful life are tested at the end of each reporting period and adjusted when necessary.
An asset's carrying amount is immediately depreciated to its recoverable amount if the asset's carrying amount exceeds its assessed recoverable amount.
Gains and losses from divestments are determined by comparing the proceeds and the carrying amount and recognised net in profit or loss.
Assets with an indefinite useful life, for example, goodwill and intangible assets that are not ready for use are not impaired but tested annually for any impairment requirements. The brands that were added through the acquisitions of Sørensen og Balchen and MECA have been deemed to have indefinite useful lives, which is why these are also tested at least annually for any impairment requirements.
Assets impaired are measured in terms of value decline whenever events or changes in conditions indicate that the carrying amount may not be recoverable. If this occurs, a calculation of the asset's recoverable amount is performed.
The recoverable amount comprises the highest of the value in use of the asset in the operation and the value that would be received if the asset was divested to an independent party, net realisable value. The value in use comprises the present value of all in and out payments attributable to the asset during the period it is anticipated to be used in the operation, plus the present value of the net realisable value at the end of the useful life. If the estimated recoverable amount falls below the carrying amount, the asset is impaired to the recoverable amount. The impairment is recognised in profit or loss in the period it is determined.
Refer also to Note 12 for information on how impairment testing is performed. Previously recognised impairment is reversed only if there has been a change to the assumptions that served as the basis for determining the recoverable amount in connection with the impairment. If this is the case, a reversal will be conducted to increase the carrying amount of the impaired asset to its recoverable amount. A reversal of an earlier impairment takes place in an amount that does not allow the new carrying amount to exceed what would have been the carrying amount (after impairment) if the impairment had not taken place. Impairment of goodwill is never reversed.
Inventories are recognised at the lower of the cost and net realisable value. The cost is established by using the first in/first out principle (FIFO).
A provision for estimated obsolescence in inventories is established when there is an objective basis to assume that the Group will be unable to receive the carrying amount when inventories are sold in the future. The size of the provision amounts to the difference between the asset's carrying amount and the value of expected future cash flows. The reserved amount is recognised in profit or loss. The inventory value was reduced by the value included in the inter-company profit from goods sold from the Group's central warehouse to the company's own stores on the goods that are still in stock. Furthermore, the inventory value was also reduced by the value of the remaining portion of the supplier bonus on goods that are still in stock.
Financial assets recognised as assets in the balance sheet include loan receivables, accounts receivable and cash and cash equivalents. Liabilities in the balance sheet include long-term and short-term loans and accounts payable. A currency derivative is recognised either as an asset or liability, depending on changes in the exchange rate. A financial asset or financial liability is recognised in the balance sheet when the company becomes party to the contractual conditions. Accounts receivable are recognised when an invoice is sent and accounts payable are recognised when an invoice has been received. With the exception of cash and cash equivalents, only an insignificant portion of the financial assets is interest-bearing, which is why interest exposure is not recognised. The maximum credit risk corresponds to the carrying amount of the financial assets. The terms for long-term and short-term loans are stated in separate note disclosures; other financial liabilities are non-interest-bearing. A financial asset, or portion thereof, is eliminated when the rights contained in the contract are realised or mature. A financial liability, or portion thereof, is eliminated as it is regulated when the commitment in the agreement has been fulfilled or has been terminated in another manner.
When establishing the fair value of derivatives, official market listings at year-end are used. If no such information is available, a measurement is conducted applying established methods, such as discounting future cash flows to the quoted market rate for each term. Translation to SEK is based on the quoted exchange rate at year-end.
Long-term receivables comprise primarily deposits and lease-purchase agreements. These are recognised at the amortised cost. A provision for probable losses on accounts receivable is made when there are objective indications to assume that the Group will not receive all the amounts that are due for payment in accordance with the receivables' original conditions. The size of the provision amounts to the difference between the asset's carrying amount and the present value of expected future cash flows. The reserved amount is recognised in profit or loss.
Accounts receivable are recognised net after provisions for probable bad debts. The expected term of accounts receivable is short, which is why the amount is recognised at nominal value without discounting in accordance with the method for amortised cost. A provision for probable bad debts on accounts receivable is made when there are objective indications to assume that the Group will not be able to receive all the amounts that are due for payment in accordance with the receivables' original conditions. The size of the provision amounts to the difference between the asset's carrying amount and the value of expected future cash flows. The reserved amount is recognised in profit or loss.
Cash and cash equivalents comprise cash funds held at financial institutions and current liquid investments with a term from the date of acquisition of less than three months, which are exposed to only an insignificant risk of fluctuations in value. Cash and cash equivalents are recognised at nominal amounts.
Mekonomen Group applies hedge accounting to receivables in foreign currencies. Hedging is conducted using currency derivatives with a maximum term of three months. Hedged receivables in foreign currencies are recognised at the closing day rate and hedging instruments are recognised separately at fair value in the balance sheet and the change in value is recognised in profit or loss.
The Group signed derivative instruments aimed at hedging interest payments attributable to loans at floating interest rates (cash-flow hedges). The Group applies hedge accounting to these derivative agreements. The derivatives are measured at fair value in the balance sheet. Value changes are recognised in Other comprehensive income to the extent they are effective and accumulated as a separate component in shareholders' equity until the hedged item impacts earnings. The portion of unrealised value changes that is ineffective is recognised in profit or loss.
The expected term for accounts payable is short, which is why the debt is recognised at nominal amount without discounting according to the method for amortised cost.
Liabilities to credit institutions, overdraft facilities and other liabilities (loans) are initially measured at fair value net after transaction costs. Thereafter, loans are recognised at amortised cost. Any transaction costs are distributed over the loan period applying the effective interest method. Long-term liabilities have an estimated term longer than one year while short-term liabilities have a term of less than one year.
Ordinary shares are classified as share capital. Transaction costs in connection with a new rights issue are recognised as a deduction, net after tax, from proceeds from the rights issue.
Provisions differ from other liabilities since there is uncertainty regarding the date of payment and the amount for settling the provision. Provisions are recognised in the statement of financial position when Mekonomen Group has a legal or informal obligation as a result of an event that has occurred and it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amounts can be made. Provisions are recognised in an amount corresponding to the most reliable estimate of the payment required to settle the commitment. When an outflow of resources is expected to be required far later in the future, the expected future cash flow and provision are recognised at present value.
Restructuring reserves are recognised when the Group has both decided on a detailed restructuring plan and implementation has begun or the main features have been announced to the parties concerned.
The cash-flow statement was prepared in accordance with the indirect method. The recognised cash flow comprises only transactions that result in inward and outward payments.
The Parent Company complies with the Swedish Annual Accounts Act and the Swedish Financial Reporting Board's recommendation RFR 2 Accounting for Legal Entities. Application of RFR 2 means that, in the annual accounts for a legal entity, the Parent Company is to apply all of the IFRS and statements that have been approved by the EU where this is possible within the framework of the Swedish Annual Accounts Act and the Pension Obligations Vesting Act and taking into account the link between accounting and taxation. The recommendation specifies the exceptions and additions that are to be made from IFRS. The differences between the Group's and the Parent Company's accounting policies are stated below.
Financial instruments exist to a limited extent and are recognised in the Parent Company based on cost in accordance with the Annual Accounts Act.
The policies have been applied consistently for all years presented, unless otherwise stipulated.
During 2016, the Swedish Financial Reporting Board issued a new version of the RFR 2 Accounting for Legal Entities. Amendments made to RFR 2 have meant that exchange-rate differences regarding net investments in foreign operations are recognised in the income statement instead of comprehensive income in accordance with the amendments to RFR 2 as of 1 January 2016; comparative figures are recalculated.
The other amendments to RFR 2 did not have any material impact on the Parent Company's financial statements.
The income statement and balance sheet comply with the presentation format specified in the Annual Accounts Act. This means they are slightly different to the consolidated financial statements, for example, balance-sheet items are more specified and subitems are given different designations in shareholders' equity
Participations in subsidiaries are recognised in the Parent Company according to the cost method. Acquisition-related costs for subsidiaries, expensed in the consolidated financial statements, are included as part of the cost for participations in subsidiaries.
Contingent considerations are measured based on the probability that the purchase consideration will be paid. Any changes in the provision/receivable will be added/deducted from the cost. In the consolidated financial statements, contingent consideration is measured at fair value with changes in value in profit or loss. The carrying amount for participations in subsidiaries is tested pertaining to any impairment requirements when there are indications of impairment needs.
The amounts reserved as untaxed reserves consist of taxable temporary differences. Due to the link between accounting and taxation, the deferred tax liabilities that are attributable to the untaxed reserves are not recognised separately in a legal entity. The changes in untaxed reserves are recognised in accordance with Swedish practice in profit or loss for individual companies under the heading "Appropriations." The accumulated value of provisions are recognised in the balance sheet under the heading "Untaxed reserves," of which 22 per cent is regarded as deferred tax liabilities and 78 per cent as restricted shareholders' equity.
Shareholders' contributions paid are recognised as an increase in the value of shares and participations. An assessment is then conducted as to whether impairment requirements exist for the value of the shares and participations in question.
Group contributions are recognised according to the alternative rule, entailing that all Group contributions, both paid and received, are recognised as appropriations.
Defined-benefit and defined-contribution pension plans are recognised in accordance with the current Swedish accounting standard, which is based on the regulations in the Pension Obligations Vesting Act.
All lease agreements, regardless of whether they are finance or operating leases, are recognised as operating leases (rental agreements), which means that the leasing charges are distributed according to the straight-line method across the leasing period.
The financial statements are in SEK M, unless otherwise stated . Rounding off may result in some tables not tallying.
The preparation of the annual accounts and application of various accounting standards are based to a certain extent on management's assessments or assumptions and estimates that are considered reasonable under the circumstances. These assumptions and estimates are frequently based on historic experience, as well as other factors, including expectations of future events. The results could differ if other assumptions and estimates were used and the actual outcome will, in terms of definition, rarely agree with the estimated outcome. The assumptions and appreciations made by Mekonomen Group in the 2016 annual accounts, and which had the greatest impact on earnings and assets and liabilities, are discussed below.
When assessing the impairment requirement for goodwill and other intangible assets with an indefinite useful life, the carrying amount is compared with the recoverable amount. The recoverable amount is the highest of an asset's net realisable value and the value in use. Since there are normally no listed prices that may be used to assess the net realisable value of an asset, the value in use will normally be the value that is used to compare with the carrying amount. Calculation of the value in use is based on assumptions and assessments. Key assumptions are the future trends for revenue and margins, including trends for prices and volumes, utilisation of operating capital employed, as well as yield requirements, which are used to discount future cash flows. These assumptions are described in more detail in Note 12 Intangible fixed assets.
On the whole, this means that the measurement of goodwill and intangible assets items with an indefinite useful life is subject to significant estimates and assessments.
In conjunction with acquisitions, analyses are prepared in which all identifiable assets and liabilities, including intangible assets, are identified and measured at fair value on the date of acquisition. In accordance with IFRS 3, acquired identifiable intangible assets, for example, customers, franchise contracts, brands and customer relations, are to be separated from goodwill. This applies if these fulfil the criteria as assets, meaning that it is possible to separate them or they are based on contractual or other formal rights, and that their fair values can be established in a reliable manner. An examination is conducted at each acquisition. The remaining surplus value is allocated to goodwill. Measuring identifiable assets and liabilities in acquisition assessments is subject to important estimates and assessments. Information about company acquisitions and acquisition analyses is found in Note 31.
The Group operates in several geographic markets, with sales to consumers and companies and with a wide range to many different customer groups. In order to satisfy customers' needs, there must be a sufficiently large inventory of products and also various types of guarantees that the products function as they should. With this type of operation that is conducted within the Group, there is a risk of customer loss and that some of the Group's stocked products cannot be sold at their carrying amounts, and also the risk that the company has guarantee commitments that extend further than the reserves for these commitments. The Group has established policies for reserves for accounts receivable, obsolescence provisions and provisions for guarantee commitments. These policies per se are estimates of historic outcome and evaluated continuously to ensure that they correspond to actual outcome in terms of customer losses, obsolescence and guarantee commitments. Further information about reserves for customer losses is found in Note 18.
When preparing the financial statements, Mekonomen Group calculates the income tax for each tax jurisdiction in which the Group operates and the deferred taxes attributable to temporary differences. Deferred tax assets that are primarily attributable to loss carryforwards and temporary differences are recognised if tax assets can be expected to be recovered based on future taxable income. Changes in assumptions regarding forecast future taxable earnings, and changes in tax rates, may result in significant differences in the measurement of deferred taxes. At 31 December 2016, Mekonomen Group recognised deferred tax liabilities in excess of deferred tax assets at a net amount of SEK 86 M (114). Further information about deferred taxes is found in Note 15.
Operating segments are reported to correspond with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is the function responsible for the allocation of resources and assessing the earnings of the operating segments. In Mekonomen Group, this function has been identified as the company's President and CEO.
With the aim of streamlining Mekonomen Group's structure, Mekonomen Sweden and Mekonomen Norway report directly to the President and CEO as of 2016. This means that n organisational level, Mekonomen Nordic, has been removed. As of the first quarter of 2016, the Group is governed and reported in four segments: MECA, Mekonomen Sweden, Mekonomen Norway and Sørensen og Balchen. Reporting according to the new segment division took place in 2016 for the first time; comparative figures have been recalculated.
The MECA segment is unchanged and primarily includes wholesale and store operations in Sweden and Norway, the export business to Denmark to the end of 28 December 2016, and delivery and service of workshop equipment in Opus Equipment. As of 1 January 2015, store operations in Denmark are presented as discontinued operations and therefore are not included in the MECA segment. For additional information regarding discontinued operations, refer to Note 34.
The Mekonomen Sweden segment primarily includes wholesale, store and fleet operations in Sweden. In connection with the changed segment division, a reallocation of items has been made to Mekonomen Sweden, which corresponds to a higher net sales of SEK 51 M, and a positive EBIT effect of SEK 28 M for 2015, compared with what was previously presented for Mekonomen Sweden under the Mekonomen Nordic segment.
The Mekonomen Norway segment primarily includes store and fleet operations in Norway. In connection with the changed segment division, a reallocation of items has been made to Mekonomen Norway, which corresponds to a higher net sales of SEK 11 M, and a negative EBIT effect of SEK 1 M for 2015, compared with what was previously presented for Mekonomen Norway under the Mekonomen Nordic segment.
The Sørensen og Balchen segment is unchanged and primarily includes wholesale and store operations in Norway.
"Other segments" include business activities and operating segments for which information is not provided separately. This includes Mekonomen's wholesale and store operations in Finland, Mekonomen's store operations in Iceland, Marinshopen, Meko Service Nordic with the service centre operations BilLivet and Speedy, the Car Share operations, Mekonomen car leasing service, the joint venture in Poland (InterMeko Europa), the associated company Automotive Web Solutions AB, Lasingoo Norge and Group-wide functions including Mekonomen AB (publ). The units reported in "Other segments" do not achieve quantitative limits to be reported separately and the benefit is deemed to be limited for the users of the financial statements for them to be reported as separate segments. Operations in Mekonomen AB (publ) mainly comprise Group Management and finance management functions.
"Other items" include acquisition-related items attributable to Mekonomen AB's direct acquisitions and elimination of intra-Group revenue. Current acquisition-related items are amortisation of acquired intangible assets related to the acquisitions of MECA and Sørensen og Balchen.
What was previously reported as "Other" has been divided up into "Other segments" and "Other items" and Mekonomen Finland, Mekonomen Iceland, Marinshopen and central administrative functions from the former segment Mekonomen Nordic were added to "Other segments" as of 1 January 2016; comparative figures have been recalculated.
The CEO assesses the results of the operating segments at an EBIT level. Financial items are not distributed in segments since they are impacted by measures implemented by central finance management. The distribution of assets and liabilities at segment is not reported regularly.
| MECA | Mekonomen Sweden |
Mekonomen Norway |
Sørensen og Balchen |
Other segments | Other items | Group | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| SEK M | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 |
| Revenue | ||||||||||||||
| External net sales | 2,039 | 1,871 | 1,891 | 1,925 | 836 | 814 | 725 | 729 | 295 | 285 | 5,786 | 5,624 | ||
| Internal revenue | 86 | 40 | 580 | 576 | 25 | 20 | 33 | 27 | 274 | 242 | -998 | -905 | 0 | 0 |
| Other revenue | 15 | 10 | 59 | 67 | 12 | 13 | 10 | 9 | 55 | 38 | 151 | 137 | ||
| Total revenue | 2,140 | 1,921 | 2,530 | 2,568 | 873 | 847 | 768 | 765 | 624 | 565 | -998 | -905 | 5,937 | 5,761 |
| Operating profit/loss before amortisation and impairment of intangible fixed assets (EBITA) |
217 | 258 | 190 | 289 | 132 | 151 | 117 | 117 | -63 | -87 | 594 | 726 | ||
| Operating profit/loss (EBIT) | 205 | 245 | 187 | 287 | 132 | 151 | 117 | 116 | -84 | -106 | -77 | -77 | 481 | 616 |
| Financial items – net | -35 | -22 | ||||||||||||
| Profit before tax | 446 | 594 | ||||||||||||
| Investments, tangible assets1) | 15 | 10 | 29 | 27 | 3 | 4 | 5 | 2 | 7 | 5 | 58 | 48 | ||
| Investments, IT systems1) | 1 | 8 | 1 | 2 | 0 | 0 | 0 | 0 | 51 | 45 | 53 | 55 | ||
| Depreciation and impairment (tangible assets) |
15 | 12 | 28 | 28 | 6 | 6 | 3 | 4 | 9 | 8 | 62 | 57 | ||
| Amortisation and impairment (intangible assets)2) |
12 | 13 | 3 | 1 | 0 | 0 | 0 | 0 | 21 | 19 | 77 | 77 | 113 | 110 |
| Average number of employees for the period |
751 | 699 | 706 | 771 | 263 | 261 | 257 | 273 | 310 | 286 | 2,287 | 2,290 | ||
| Number of proprietary stores | 75 | 72 | 112 | 113 | 32 | 32 | 37 | 35 | 5 | 5 | 261 | 257 | ||
| Number of partner stores | 10 | 13 | 20 | 21 | 13 | 13 | 35 | 35 | 3 | 3 | 81 | 85 | ||
| Number of stores in the chain | 85 | 85 | 132 | 134 | 45 | 45 | 72 | 70 | 8 | 8 | 342 | 342 | ||
| Key figures | ||||||||||||||
| EBITA margin, %3) | 10 | 14 | 10 | 14 | 15 | 18 | 16 | 16 | 10 | 13 | ||||
| EBIT margin, %3) | 10 | 13 | 10 | 14 | 15 | 18 | 16 | 16 | 8 | 11 | ||||
| Change in sales, %3) | 9 | 11 | -2 | 7 | 3 | 2 | 0 | 2 | 3 | 7 | ||||
| Revenue per employee, SEK 000s | 2,850 | 2,748 | 3,584 | 3,331 | 3,319 | 3,245 | 2,988 | 2,802 | 2,596 | 2,516 | ||||
| Operating profit per employee, SEK 000s |
273 | 351 | 265 | 372 | 502 | 579 | 455 | 425 | 210 | 269 |
1) Investments do not include company and business combinations.
2) Including amortisation and impairment of acquisition-related intangible assets.
3) Internal sales were excluded from the calculation of the operating margin and the sales increase for the segments.
Sales between segments take place on market-based terms and conditions. Revenue from external customers that is reported to Group Management is measured in the same manner as in the income statement.
Net sales from external customers derived primarily from the sale of goods,
representing approximately 96 per cent (96) of net sales. The remaining net sales derived from workshop services, as well as annual and license fees to affiliated stores and workshops.
Net sales derived from the sale of goods from external customers are distributed according to the following customer groups:
| Analysis of net sales by customer groups, %: | 2016 | 2015 |
|---|---|---|
| - Affiliated workshops1) | 36% | 34% |
| - Other workshops | 39% | 40% |
| - Consumer | 19% | 20% |
| - Partner stores | 6% | 7% |
| Total net sales | 100% | 100% |
1) Sales in proprietary workshops are included in sales to affiliated workshops.
The company has its registered office in Sweden. The distribution of revenue from external customers in Sweden and other geographic markets is presented in the table below:
| Net sales | 2016 | 2015 |
|---|---|---|
| Sweden | 3,164 | 3,137 |
| Norway | 2,484 | 2,381 |
| Other | 138 | 106 |
| Total | 5,786 | 5,624 |
The Group has no individual customers that account for 10 per cent or more of the Group's revenue.
All fixed assets, other than financial instruments and deferred tax assets (there are no assets in connection with benefits after terminated employment or rights according to insurance agreements), located in Sweden amounted to SEK 2,255 M (2,287) and the total of such fixed assets located in other countries amounted to SEK 684 M (629), of which SEK 681 M (622) in Norway.
| Group | Parent Company | ||||
|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | ||
| PwC | |||||
| Audit assignment | 7 | 6 | 1 | 1 | |
| Audit-related services other than the audit assignment |
0 | 1 | 0 | 0 | |
| Tax consultancy | 0 | 0 | 0 | 0 | |
| Other services | 0 | 0 | 0 | 0 | |
| Total1) | 7 | 7 | 1 | 1 |
1) In addition to this, PwC received SEK 0 M (1) for the audit of discontinued operations in Denmark for the Group.
| 2016 | 2015 | ||||
|---|---|---|---|---|---|
| Average number of employees | No. of employees | Of whom, men % | No. of employees | Of whom, men % | |
| Parent Company | |||||
| Sweden | 7 | 71 | 15 | 53 | |
| Total in Parent Company | 7 | 71 | 15 | 53 | |
| Subsidiaries | |||||
| Sweden | 1,406 | 82 | 1,423 | 82 | |
| Norway | 808 | 84 | 794 | 83 | |
| Other countries | 66 | 73 | 58 | 72 | |
| Total in subsidiaries | 2,280 | 83 | 2,275 | 82 | |
| Group total | 2,287 | 83 | 2,290 | 82 |
| Salaries, remuneration, etc. SEK 000s | Salaries and other remuneration |
Soc. security expenses (of which pension costs) |
Salaries and other remuneration |
Soc. security expenses (of which pension costs) |
|---|---|---|---|---|
| Parent Company | 27,640 | 15,169 | 26,892 | 20,812 |
| (5,280) | (8,368) | |||
| Subsidiaries | 979,730 | 315,102 | 934,824 | 279,842 |
| (61,810) | (51,111) | |||
| Group total | 1,007,370 | 330,271 | 961,716 | 300,654 |
| (67,090) | (59,479) |
| Salaries and other remuneration distributed between the President and | Board and Presi dent1) (of which bonus, |
Other | Board and Presi dent1) (of which bonus, and |
Other |
|---|---|---|---|---|
| Board members and other employees, SEK 000s | and the like) | employees | the like) | employees |
| Parent Company | ||||
| Mekonomen AB | 14,343 | 13,297 | 10,181 | 16,711 |
| (70) | (797) | (1,065) | (1,375) | |
| Total in Parent Company | 14,343 | 13,297 | 10,181 | 16,711 |
| (70) | (797) | (1,065) | (1,375) | |
| Subsidiaries in Sweden | 22,715 | 553,727 | 32,880 | 514,185 |
| (1,579) | (3,569) | (1,935) | (3,606) | |
| Subsidiaries abroad | ||||
| Norway | 9,781 | 368,841 | 23,939 | 343,117 |
| (932) | (6,444) | (1,500) | (5,969) | |
| Other countries | 0 | 24,666 | 1,248 | 19,455 |
| (0) | (0) | (143) | (0) | |
| Total in subsidiaries | 32,496 | 947,234 | 58,067 | 876,757 |
| (2,511) | (10,013) | (3,578) | (9,575) | |
| Group total | 46,839 | 960,531 | 68,248 | 893,468 |
| (2,581) | (10,810) | (4,643) | (10,950) |
1) Remuneration to the Board and President includes the Parent Company and, where applicable, subsidiaries in each country.
Fees are paid to the Chairman of the Board and Board members in accordance with the resolution of the Annual General Meeting. The annual Board fee totalling SEK 2,210,000 (2,010,000) was determined in accordance with the resolution of the 2016 Annual General Meeting. Of this, SEK 550,000 (400,000) represents fees to the Chairman of the Board, SEK 310,000 (310,000) to the Executive Vice Chairman, and SEK 270,000 (260,000) to each of the remaining Board members. For members of the Board's Audit Committee, SEK 60,000 (60,000) is paid to the Chairman of the Audit Committee and SEK 35,000 (35,000) is paid to the other members of the Audit Committee. For members of the Board's Remuneration Committee, SEK 35,000 (35,000) is paid to the Chairman of the Remuneration Committee and SEK 25,000 (25,000) is paid to the other members of the Remuneration Committee.
No fees are paid to the Boards of other subsidiaries.
The President, Pehr Oscarson, has a basic salary of SEK 300,000 per month and a variable salary portion, which is based on the company's earnings and can amount to a maximum of 33 per cent of the basic annual salary. Pension premiums are payable in an amount that is based on the ITP plan.
Other benefits consist of a company car. The period of notice is 12 months if employment is terminated by the company, and six months if terminated by the President. For other senior executives, remuneration follows the policies adopted at the 2016 Annual General Meeting. This means that the company is to strive to offer its senior executives market-based remuneration, that the criteria for this is to be based on the significance of work duties, skills requirements, experience and performance and that remuneration is to comprise the following parts:
– fixed basic salary
– variable remuneration
– pension benefits and
– other benefits and severance pay
The variable remuneration for senior executives, excluding the President, is based partly on the Group's earnings and partly on individual qualitative parameters and can amount to a maximum of a certain percentage of the fixed annual salary. The percentage is linked to the position of each individual and varies between 33 and 60 percentage points for members of Group Management. Other benefits refer primarily to company cars. Pension premiums are paid in an amount that is based on the ITP plan or a corresponding system for employees outside Sweden. Pensionable salary comprises basic salary. Severance pay for termination on the part of the company can total a maximum of one annual salary. Matters pertaining to remuneration of company management are resolved by the Board's Remuneration Committee. However, remuneration of the President is determined by the Board in its entirety.
At the 2016 Annual General Meeting, it was also resolved that Group Management and a number of selected, business-critical senior executives may receive long-term variable remuneration from the company. The criteria for determining the variable remuneration portion for each individual is decided by the Board's Remuneration Committee, and for the President by the Board in its entirety. The long-term variable remuneration is to be profit-based and calculated on the Group's earnings for the 2016-2018 financial years. The entire bonus programme, as an expense for the company, is to amount to a maximum of SEK 32 M for the period. Furthermore, an additional requirement to the above is that the average price paid for the Mekonomen share on Nasdaq Stockholm on the last trading day in December 2018 is to exceed the Nasdaq Stockholm PI index for the programme period. The bonus may be realised in whole, in part or not at all depending on the consolidated profit during the duration of the long-term remuneration programme. The right to variable remuneration presupposes that the executive is still employed at the 2019 Annual General Meeting. No bonus was reserved as per 31 December 2016 pertaining to this bonus programme. In connection with the approval of the remuneration programme by the AGM, the earlier programme that ran during the financial years 2014- 2016 ceased to apply. No payments regarding this programme have yet been made.
Other than the above, the Board has not decided on any other share or share-price based incentive programs for company management.
| Basic salary1) | Bonus | Board fees2) | Other benefits | Pension premiums | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Executives/category, SEK 000s | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 |
| Kenneth Bengtsson, Chairman of the Board | 620 | 470 | ||||||||
| Mia Brunell Livfors, Executive Vice Chairman of the Board |
242 | – | ||||||||
| Caroline Berg, Board member | 195 | 335 | ||||||||
| Kenny Bräck, Board member | 270 | 260 | ||||||||
| Malin Persson, Board member | 295 | 285 | ||||||||
| Helena Skåntorp, Board member | 330 | 320 | ||||||||
| Christer Åberg, Board member | 305 | 295 | ||||||||
| John S. Quinn, Executive Vice Chairman of the Board from 10 January 20173) |
86 | – | ||||||||
| Joseph M. Holsten, Board member from 10 January 20173) |
82 | – | ||||||||
| President Pehr Oscarson from 6 October 2016 |
868 | – | 70 | – | – | – | 65 | – | ||
| former President, Magnus Johansson until 6 October 20164) |
10,980 | 2,599 | – | 772 | 64 | 41 | 1,807 | 770 | ||
| former President, Håkan Lundstedt until 15 June 2015 | – | 4,552 | – | 293 | – | 65 | – | 1,145 | ||
| Other senior executives, 6 (5)5) | 15,376 | 11,588 | 1,643 | 2,043 | 646 | 529 | 3,164 | 2,353 | ||
| Total | 27,224 | 18,739 | 1,713 | 3,108 | 2,425 | 1,965 | 710 | 635 | 5,035 | 4,268 |
1) Basic salary in this table includes holiday bonus.
2) Board fees include fees to members of the Board's Committees.
3) Remuneration and compensation set by the AGM are expensed every calendar year. Remuneration of the new Board members with regard to the period 10 January to 25 April 2017 is accordingly
expensed as of 31 December 2016 and therefore presented in the table above.
4) For 2016, remuneration of former President Magnus Johansson includes reserved costs, excluding social security costs, for salary including pension during the period of notice and for severance pay totalling SEK 8,053,000
5) Group Management's composition changed during the year. As of 31 December 2016, Group Management consists of the President as well as five other people, of whom 1 (0) is a woman. The average number of people in Group Management, except the President, amounted to 6 (5) people during 2016. For 2016, remuneration of other senior executives includes reserved costs, excluding social security costs, for salary including pension during the period of notice and for severance pay totalling SEK 2,091,000.
One member of Group Management is covered by a defined-benefit pension plan. The net obligation at 31 December 2016 amounted to SEK 1 M (1).
There are six senior executives, who also constitute Group Management. They are the President and CEO, the Executive Vice President, the CFO, the President of Sørensen og Balchen, the Corporate Supply Chain Director and the Corporate HR Director. A more detailed presentation of Group Management is found on page 47.
| Group | Parent Company | |||||
|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |||
| Depreciation of tangible fixed assets according to plan |
-60 | -57 | 0 | 0 | ||
| Impairment of tangible fixed assets | -2 | – | – | – | ||
| Total depreciation and impairment of tangible fixed assets |
-62 | -57 | 0 | 0 | ||
| Amortisation, brands | 0 | 0 | – | – | ||
| Amortisation, customer relationships |
-80 | -77 | – | – | ||
| Amortisation, franchise contracts | -4 | -4 | – | – | ||
| Amortisation, capitalised expenditure for IT systems |
-28 | -29 | – | – | ||
| Total amortisation and impairment of intangible fixed assets |
-113 | -110 | – | – | ||
| Total | -175 | -167 | 0 | 0 |
| Parent Company | ||
|---|---|---|
| 2016 | 2015 | |
| Dividends | 47 | 489 |
| Gains from divestment of participations | 0 | 0 |
| Impairment | -28 | -35 |
| Total | 19 | 454 |
| Parent Company | ||
|---|---|---|
| 2016 | 2015 | |
| Group contributions received | 247 | 331 |
| Group contributions paid | -56 | -44 |
| Changes in tax allocation reserve | -34 | -61 |
| Total | 156 | 226 |
Exchange-rate differences were recognised in profit or loss as follows:
| Group | Parent Company | |||||
|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |||
| Exchange-rate differences in EBIT | 3 | 0 | 0 | 0 | ||
| Exchange-rate differences in net financial items1) |
-8 | 8 | -13 | 9 | ||
| Total | -5 | 8 | -13 | 9 |
1) Exchange-rate differences regarding Parent Company's net investments in foreign operations of SEK 4 M (-3) are recognised in the income statement instead of comprehensive income in accordance with the amendment to RFR 2 as of 1 January 2016; comparative figures are recalculated.
| Group | Parent Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Current tax | ||||
| Sweden | -43 | -59 | -23 | -40 |
| Other countries | -90 | -103 | – | – |
| Total current tax | -133 | -162 | -23 | -40 |
| Changes in deferred tax, temporary differences |
28 | -2 | 22 | 3 |
| Recognised tax expenses | -105 | -164 | 0 | -37 |
| Tax on profit for the year | ||||
| Recognised profit before tax | 446 | 594 | 118 | 627 |
| Tax according to applicable tax rate | -110 | -149 | -26 | -138 |
| Tax on standard interest on tax allocation reserves |
0 | 0 | 0 | 0 |
| Tax effects on expenses that are not tax deductible |
||||
| Other non-deductible expenses | -4 | -5 | -7 | -8 |
| Other non-taxable revenue | 0 | 0 | 10 | 108 |
| Effects on adjustments from prece ding year |
1 | 1 | – | – |
| Effects of non-capitalised loss carryforwards |
-3 | -11 | – | – |
| Effect of change in the Norwegian tax rate |
0 | 0 | – | – |
| Effects of capitalised loss carryfor wards1) |
10 | – | 22 | 1 |
| Recognised tax expenses | -105 | -164 | 0 | -37 |
1) For the Group, pertains to the effect of capitalisation of historical uncapitalised loss carryforwards. Capitalised loss carryforwards in 2016 and 2015 in the Parent Company pertain in their entirety to loss carryforwards attributable to the Danish operations and correspond to the portion of loss carryforwards in Denmark that is deemed to be able to be utilised based on future Group deductions in Sweden.
The weighted average tax rate amounted to 24.6 per cent (25.1). The decline is mainly due to the reduction in the tax rate in Norway to 25 per cent (27). However, the total decrease of the weighted average tax rate is counteracted by a higher proportion of tax in Norway with a higher tax rate than Sweden.
Disclosures on financial instruments measured at fair value in the balance sheet The financial instruments that were measured at fair value in the balance sheet are
showed below. Measurement is divided into three levels:
Level 1: Fair value is determined according to listed prices in an active market for the same instrument.
Level 2: Fair value is determined based on wither direct (prices) or indirect (derived from prices) observable market data not included in Level 1. Level 3: Fair value is determined base on inputs not observable in the market.
All of Mekonomen's financial instruments are included in Level 2.
The following summarises he main methods and assumptions used to determined the fair value of the financial instruments shown in the table below.
Fair value of listed securities, where appropriate, is determined based on the asset's listed average price on the balance-sheet date with no additions for transaction costs on the acquisition date.
For currency contracts, fair value is determined on the basis of listed prices. Fair value for interest-rate swaps is based on discounting estimated future cash flows in accordance with the contract terms and due dates, and on the basis of the market interest rate for similar instruments on the balance-sheet date. If discounted cash flows have been used, future cash flows are calculated on company management's best assessment. The discount rate applied is a market-based interest rate on similar instruments on the balance-sheet date.
All valuation techniques applied are accepted on the market and take into account all parameters which the market would take into consideration when pricing. The techniques are reviewed regularly with a view to ensuring their reliability. Assumptions applied are followed up against actual results so as to identify any need for adjustments to measurements and forecasting tools.
For methods of payment, receivables and liabilities with variable interest rates, and current assets and liabilities (such as accounts receivable and accounts payable), fair value is equivalent to the carrying amount.
| Group's derivative instruments measured at fair value in balance sheet |
2016 | 2015 |
|---|---|---|
| Financial liabilities | ||
| Derivatives: Currency swaps | – | – |
| Interest-rate swaps | 7 | 3 |
| Total | 7 | 3 |
Net gains on derivative instruments, held for trading amounted to SEK 1 M (1).
| Financial assets and liabilities by measurement category, 31 Dec. 2016 |
Derivative instru ments |
Loans and receiva bles |
Other financial liabilities |
Total carrying amount |
Fair value | Non-financi al assets and liabilities |
Total Balance sheet |
|---|---|---|---|---|---|---|---|
| Financial assets | |||||||
| Other long-term receivables | – | 44 | – | 44 | 44 | 2 | 46 |
| Accounts receivable | – | 485 | – | 485 | 485 | – | 485 |
| Other current receivables | – | – | – | – | – | 336 | 336 |
| Cash and cash equivalents | – | 291 | – | 291 | 291 | – | 291 |
| Total | – | 820 | – | 820 | 820 | 338 | 1,158 |
| Financial liabilities | |||||||
| Long-term liabilities, interest-bearing | 7 | – | 1,331 | 1,338 | 1,338 | – | 1,338 |
| Current liabilities, interest-bearing | – | – | 404 | 404 | 404 | – | 404 |
| Accounts payable | – | – | 612 | 612 | 612 | – | 612 |
| Other current liabilities | – | – | – | – | – | 588 | 588 |
| Total | 7 | – | 2,346 | 2,353 | 2,353 | 588 | 2,941 |
| Financial assets and liabilities by measurement category, 31 Dec. 2015 |
Derivative instru ments |
Loans and receiva bles |
Other financial liabilities |
Total carrying amount |
Fair value | Non-finan cial assets and liabilities |
Total Balance sheet |
|---|---|---|---|---|---|---|---|
| Financial assets | |||||||
| Other long-term receivables | – | 49 | – | 49 | 49 | 2 | 51 |
| Accounts receivable | – | 453 | – | 453 | 453 | – | 453 |
| Other current receivables | – | – | – | – | – | 365 | 365 |
| Cash and cash equivalents | – | 295 | – | 295 | 295 | – | 295 |
| Total | – | 798 | – | 798 | 798 | 367 | 1,164 |
| Financial liabilities | |||||||
| Long-term liabilities, interest-bearing | 3 | – | 1,466 | 1,469 | 1,469 | – | 1,469 |
| Current liabilities, interest-bearing | – | – | 461 | 461 | 461 | – | 461 |
| Accounts payable | – | – | 540 | 540 | 540 | – | 540 |
| Other current liabilities | – | – | – | – | – | 559 | 559 |
| Total | 3 | – | 2,467 | 2,470 | 2,470 | 559 | 3,029 |
| 31 Dec. 2016 | ||||||
|---|---|---|---|---|---|---|
| Nominal amount | 2017 | 2018 | 2019 | 2020 | 2021 | Total |
| Liabilities to credit institutions, bank borrowing | 152 | 846 | 458 | 0 | 0 | 1,457 |
| Liabilities to leasing companies | 2 | 1 | 0 | 0 | 0 | 3 |
| Overdraft facilities | 268 | 0 | 0 | 0 | 0 | 268 |
| Derivatives | 0 | 0 | 7 | 0 | 0 | 7 |
| Accounts payable | 612 | 0 | 0 | 0 | 0 | 612 |
| Total | 1,034 | 847 | 465 | 0 | 0 | 2,347 |
| 31 Dec. 2015 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Nominal amount | 2016 | 2017 | 2018 | 2019 | 2020 | Total | |||
| Liabilities to credit institutions, bank borrowing | 154 | 152 | 844 | 490 | 0 | 1,641 | |||
| Liabilities to leasing companies | 2 | 1 | 0 | 0 | 0 | 3 | |||
| Overdraft facilities | 327 | 0 | 0 | 0 | 0 | 327 | |||
| Derivatives | 0 | 0 | 0 | 3 | 0 | 3 | |||
| Accounts payable | 540 | 0 | 0 | 0 | 0 | 540 | |||
| Total | 1,023 | 153 | 844 | 493 | 0 | 2,514 |
Time when hedged cash flows in the hedging reserve are expected to occur and affect profit for the year
| 2017 - Q1 | 2017 - Q2 | 2017 - Q3 | 2017 - Q4 | 2018 | 2019 and later | Total | |
|---|---|---|---|---|---|---|---|
| Currency swap | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Interest-rate swap | 1 | 1 | 1 | 1 | 3 | 1 | 7 |
| Total | 1 | 1 | 1 | 1 | 3 | 1 | 7 |
Derivative contracts are subject to legally binding framework agreements on netting. This information is limited as the amounts are of minor value.
| Goodwill | Brands | Franchise con tracts |
Customer rela tions |
IT investments | Total Group | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | ||
| Opening accumulated cost, 1 January | 1,835 | 1,891 | 325 | 331 | 41 | 45 | 742 | 741 | 229 | 182 | 3,173 | 3,190 | |
| Acquisitions | – | – | – | – | – | – | – | – | 53 | 55 | 53 | 55 | |
| Acquisitions in connection with acquired operation |
5 | 16 | – | – | – | – | 22 | 12 | – | 5 | 27 | 33 | |
| Divestments/disposals | -2 | -28 | – | – | – | – | – | – | -2 | -13 | -4 | -41 | |
| Translation difference, currency | 45 | -44 | 5 | -5 | 3 | -4 | 12 | -11 | – | – | 65 | -64 | |
| Closing accumulated cost, 31 December |
1,883 | 1,835 | 330 | 325 | 44 | 41 | 776 | 742 | 280 | 229 | 3,314 | 3,173 | |
| Opening acc. depreciation and impairment, 1 January |
– | -28 | -2 | -2 | -20 | -18 | -276 | -204 | -141 | -125 | -440 | -378 | |
| Divestments/disposals | – | 28 | – | – | – | – | – | – | 2 | 13 | 2 | 41 | |
| Depreciation for the year | – | – | 0 | 0 | -4 | -4 | -80 | -77 | -28 | -29 | -113 | -110 | |
| Translation difference, currency | – | – | 0 | 0 | -1 | 2 | -6 | 5 | – | – | -7 | 7 | |
| Closing accumulated amortisation and impairment, 31 December |
– | – | -3 | -2 | -25 | -20 | -362 | -276 | -167 | -141 | -558 | -440 | |
| Closing carrying amount, 31 December |
1,883 | 1,835 | 327 | 322 | 19 | 21 | 415 | 467 | 113 | 88 | 2,757 | 2,734 |
| Goodwill | Brands | contracts | Franchise | Customer relations | IT investments | Total Group | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Carrying amount for operating segment at |
31 Dec. 2016 |
31 Dec. 2015 |
31 Dec. 2016 |
31 Dec. 2015 |
31 Dec. 2016 |
31 Dec. 2015 |
31 Dec. 2016 |
31 Dec. 2015 |
31 Dec. 2016 |
31 Dec. 2015 |
31 Dec. 2016 |
31 Dec. 2015 |
| MECA | 1,105 | 1,104 | 270 | 270 | – | – | 351 | 396 | 9 | 15 | 1,735 | 1,786 |
| Mekonomen Sweden | 230 | 230 | – | – | – | – | 8 | 8 | 2 | 3 | 240 | 241 |
| Mekonomen Norway | 57 | 52 | – | – | – | – | – | – | 0 | 0 | 57 | 52 |
| Sørensen og Balchen | 423 | 383 | 56 | 51 | 19 | 21 | 54 | 61 | 1 | 1 | 553 | 517 |
| Other | 68 | 66 | 1 | 1 | – | – | 2 | 2 | 100 | 69 | 171 | 138 |
| 1,883 | 1,835 | 327 | 322 | 19 | 21 | 415 | 467 | 113 | 88 | 2,757 | 2,734 |
Goodwill is distributed among the Group's cash-generating units (CGU) identified by operating segments. In addition to goodwill, the Group has acquired brands that are deemed to have indefinite useful period. The useful period is deemed indefinite when it pertains to well-established brands in their individual markets, which the
Group intends to retain and further develop. The brands that have been identified and evaluated essentially pertain to the acquisition of MECA in 2012 and the acquisition of Sørensen og Balchen in 2011, with the associated BilXtra brand. Other brands are amortised and their carrying amount at year-end was SEK 1 M (1). A summary of goodwill and brands with indefinite useful period at operating segment level is provided in the table below.
| Goodwill 2016 | Brands (indefinite useful period) 2016 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Operating segments |
Test level CGU |
1 Jan. 2016 |
Acquisi tions |
Impair ment |
Divest ments |
Translation difference, currency |
31 Dec. 2016 |
1 Jan. 2016 |
Acquisi tions |
Impair ment |
Translation difference, currency |
31 Dec. 2016 |
| MECA | Operating segments |
1,104 | 2 | – | – | 0 | 1,105 | 270 | – | – | – | 270 |
| Mekonomen Sweden |
Operating segments |
230 | 2 | – | -2 | – | 230 | – | – | – | – | – |
| Mekonomen Norway |
Operating segments |
52 | – | – | – | 5 | 57 | – | – | – | – | – |
| Sørensen og Balchen |
Operating segments |
383 | – | – | – | 40 | 423 | 51 | – | – | 5 | 56 |
| Other | Operating segments |
66 | 2 | – | – | – | 68 | – | – | – | – | – |
| 1,835 | 5 | – | -2 | 45 | 1,883 | 321 | – | – | 5 | 326 |
| Goodwill 2015 | Brands (indefinite useful period) 2015 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Operating segments |
Test level CGU |
1 Jan. 2015 |
Acquisi tions |
Impair ment |
Divest ments |
Translation difference, currency |
31 Dec. 2015 |
1 Jan. 2015 |
Acquisi tions |
Impair ment |
Translation difference, currency |
31 Dec. 2015 |
| MECA | Operating segments |
1,097 | 8 | – | – | 0 | 1,104 | 270 | – | – | – | 270 |
| Mekonomen Sweden |
Operating segments |
223 | 7 | – | – | – | 230 | – | – | – | – | – |
| Mekonomen Norway |
Operating segments |
57 | – | – | – | -5 | 52 | – | – | – | – | – |
| Sørensen og Balchen |
Operating segments |
422 | – | – | – | -39 | 383 | 56 | – | – | -5 | 51 |
| Other | Operating segments |
64 | 2 | – | – | – | 66 | – | – | – | – | – |
| 1,862 | 16 | – | – | -44 | 1,835 | 326 | – | – | -5 | 321 |
Testing impairment requirements for goodwill and other intangible assets with indefinite useful period takes place in the fourth quarter annually or more frequently if there are indications of value depreciation. The recoverable amount for a cash-generating unit is established based on calculations of the value in use. The value in use is the present value of the estimated future cash flows.
Cash-flow forecasts are based on an assessment of the anticipated growth rate and the trend of the EBITDA margin, based on the budget that was adopted in December for the next year, forecasts for the next three years, managements' longterm expectations of the operation, and historic trends. The cash-flow forecasts for the second to fourth years are based on an annual growth rate of 2 per cent (2). Cash flows beyond this four-year period were extrapolated using an estimated growth rate of 2.0 per cent (2.5).
Calculated value in use is most sensitive to changes in assumptions for growth-rate, EBITDA margin and the relevant discount rate (WACC, Weighted Average Cost of Capital), which is used to discount future cash flows. The significant assumptions used to calculate the value in use for 2016 and 2015, respectively, are summarised as follows:
| 31 Dec. 2016 |
31 Dec. 2015 |
|
|---|---|---|
| Discount rate (WACC) before tax | 9.2% | 9.1% |
| Discount rate (WACC) after tax | 7.6% | 7.5% |
| Growth rate beyond the forecast period | 2.0% | 2.5% |
| Total price and volume trend years 2-4 of forecast period |
2.0% | 2.0% |
The present value of the forecast cash flows was calculated by applying a discount rate of 7.6 per cent (7.5) after tax, corresponding to a discount rate before tax of approximately 9.2 per cent (9.1).
The conditions that apply for the various markets in which Mekonomen operates do not deviate significantly from each other, which is why the same rate is used for all units.
The growth rate does not exceed the long-term growth rate for the market segments in which each cash-generating unit operates.
In the event of a change, assumptions about future price and volume trends have a major impact on the cash flow. In plans that are used as the basis for the cash flows, management assumes that the average price and volume trend over the period until 2020 will not exceed 2.0 per cent per year.
The gross margin is assumed to be in line with current and historic levels throughout the forecast period. It is assumed that the operations' other expenses will follow the same rate of growth as revenue.
An increase in the discount rate by 2 percentage points, a reduction in the assumed long-term growth rate by 2 percentage points or a decrease in the EBITDA margin by 2 percentage points would not individually result in any impairment requirement.
According to implemented impairment testing, there is no impairment requirement for goodwill or other intangible assets with indefinite periods of use as per 31 December 2016.
| Group | Parent Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Opening accumulated cost, 1 January | 80 | 75 | 1 | 1 |
| Purchases, rebuilding and extensions | 3 | 5 | – | 0 |
| Sales/disposals | -1 | 0 | -1 | – |
| Translation difference, currency | 0 | 0 | – | – |
| Closing accumulated cost, 31 December | 83 | 80 | 0 | 1 |
| Opening accumulated depreciation, 1 January | -47 | -37 | -1 | 0 |
| Sales/disposals | 1 | 0 | 1 | – |
| Depreciation for the year | -10 | -10 | 0 | 0 |
| Translation difference, currency | 0 | 0 | – | – |
| Closing accumulated depreciation, 31 December | -56 | -47 | 0 | -1 |
| Closing carrying amount, 31 December | 27 | 33 | 0 | 0 |
| Equipment and transport Group |
Financial leasing Group |
Total Group | ||||
|---|---|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |
| Opening accumulated cost, 1 January | 473 | 580 | 24 | 27 | 497 | 607 |
| Purchasing | 50 | 39 | 6 | 5 | 56 | 44 |
| Purchase in connection with acquired operation | 2 | 5 | – | – | 2 | 5 |
| Sales/disposals | -19 | -136 | 0 | -8 | -19 | -144 |
| Translation difference, currency | 13 | -15 | – | – | 13 | -15 |
| Closing accumulated cost, 31 December | 519 | 473 | 30 | 24 | 549 | 497 |
| Opening acc. depreciation and impairment, 1 January | -329 | -420 | -21 | -24 | -350 | -444 |
| Sales/disposals | 15 | 122 | 0 | 8 | 15 | 130 |
| Depreciation for the year | -43 | -42 | -6 | -5 | -49 | -47 |
| Impairment for the year | -2 | – | – | – | -2 | – |
| Translation difference, currency | -10 | 11 | – | – | -10 | 11 |
| Closing accumulated depreciation and impairment, 31 December | -369 | -329 | -27 | -21 | -396 | -350 |
| Closing carrying amount, 31 December | 151 | 145 | 3 | 3 | 154 | 148 |
As a part of streamlining the logistics structure, Mekonomen Group will centralise the central warehouse structure in Sweden. In July 2016, Mekonomen Group signed an agreement with TGW Logistics Group for the expansion of the existing central warehouse in Strängnäs with a new fully automated section. The estimated investment for the central warehouse system is SEK 190 M during the period 2016-2018. Accumulated investments as of the balance sheet date amount to a minor value.
Operating leases primarily comprise leased premises.
| Group | Parent Company | |||
|---|---|---|---|---|
| Information about leasing expenses, operating leases |
2016 | 2015 | 2016 | 2015 |
| Premises rent | 314 | 311 | 1 | 1 |
| Leasing expenses, other | 41 | 39 | 0 | 1 |
| Total | 355 | 350 | 1 | 2 |
| Group | Parent Company | |||
|---|---|---|---|---|
| Future leasing fees for irrevoca ble lease agreements falling due for payment: |
31 Dec. 2016 |
31 Dec. 2015 |
31 Dec. 2016 |
31 Dec. 2015 |
| Within one year | 337 | 311 | 1 | 2 |
| Later than one year but within five years |
712 | 683 | 1 | 3 |
| After five years | 300 | 139 | – | – |
| 1,349 | 1,133 | 2 | 5 |
Of the future lease fees, rent for premises represented SEK 1,265 M (1,075) for the Group and SEK 2 M (4) for the Parent Company.
Deferred tax assets and liabilities are offset against each other when a legal right of offset exists for current tax assets and tax liabilities and when deferred taxes refer to the same tax authority. Below, deferred tax assets and liabilities are presented gross, without consideration to offsets done in the same tax law jurisdiction.
| Deferred tax assets (+)/tax liabilities (-) |
||||
|---|---|---|---|---|
| 31 Dec. 2016 |
31 Dec. 2015 |
31 Dec. 2016 |
31 Dec. 2015 |
|
| Capitalised loss carryforwards1) | 81 | 57 | 76 | 54 |
| Temporary differences on inter-com pany profits |
48 | 53 | – | – |
| Temporary differences, inventory obsolescence |
16 | 15 | – | – |
| Temporary differences on pension commitments |
1 | 1 | – | – |
| Temporary differences, other | 18 | 14 | 3 | 3 |
| Total deferred tax assets | 164 | 140 | 79 | 57 |
| Untaxed reserves | -59 | -49 | – | – |
| Surplus value in intangible fixed assets (through acquisition) |
-166 | -183 | – | – |
| Temporary differences on reversed net asset goodwill |
-25 | -22 | – | – |
| Total deferred tax liabilities | -250 | -254 | – | – |
| Total (net) | -86 | -114 | 79 | 57 |
| Group | Parent Company | |||
|---|---|---|---|---|
| Gross change in deferred tax assets/tax liabilities |
2016 | 2015 | 2016 | 2015 |
| Opening balance | -114 | -113 | 57 | 53 |
| Translation difference, currency | -2 | 2 | – | – |
| Acquisition of subsidiaries | – | 1 | – | – |
| Recognition in income statement | 28 | -2 | 22 | 4 |
| Tax recognised in comprehensive income |
1 | -2 | – | – |
| At year-end | -86 | -114 | 79 | 57 |
1) Capitalised loss carryforwards in the Parent Company pertain in their entirety to loss carryforwards attributable to the Danish operations and correspond to the portion of loss carryforwards in Denmark that is deemed to be able to be utilised based on future Group deductions in Sweden.
At the end of the financial year, tax loss carryforwards amounted to SEK 0 M (0) in the Parent Company and SEK 633 M (501) in the Group. For deficits amounting to SEK 79 M (66), there is a time limit of 10 years. All other deficits run without limit in time. Deferred tax assets pertaining to tax loss carryforwards in the Group amounted to SEK 81 M (57) on the balance-sheet date, of which SEK 76 M (54) was attributable to the Danish operations. Deferred tax assets on the remaining deficit was not assigned a value in the balance sheet.
| Group | ||
|---|---|---|
| 31 Dec. 2016 |
31 Dec. 2015 |
|
| Rental deposits paid | 1 | 4 |
| Hire-purchase contracts | 37 | 42 |
| Other | 7 | 3 |
| Total | 44 | 49 |
| Group | ||
|---|---|---|
| Hire-purchase contracts | 31 Dec. 2016 |
31 Dec. 2015 |
| Hire-purchase contracts | 43 | 59 |
| Provisions for doubtful hire-purchase contracts | -6 | -17 |
| Total | 37 | 42 |
| Group | |||
|---|---|---|---|
| Provisions for doubtful hire-purchase con tracts |
2016 | 2015 | |
| Provision for bad debts at the beginning of the year | -17 | -28 | |
| Impairment for the year | -1 | -2 | |
| Receivables written off during the year as non-col lectable |
8 | 9 | |
| Recovered prior impairment | 4 | 3 | |
| Translation difference, currency | -1 | 1 | |
| Total | -6 | -17 |
Interest income on hire-purchase contracts during the year was SEK 0 M (1).
| Group | ||
|---|---|---|
| 31 Dec. 2016 |
31 Dec. 2015 |
|
| Goods for resale | 1,279 | 1,226 |
| Total | 1,279 | 1,226 |
The cost of inventories expensed is included in the item goods for resale in the income statement for continuing operations and amounted to SEK 2,686 M (2,529). Provisions for obsolescence are induced in the value of inventories.
| Group | ||
|---|---|---|
| 31 Dec. 2016 |
31 Dec. 2015 |
|
| Accounts receivable | 485 | 453 |
| Tax assets | 77 | 66 |
| Other receivables | 33 | 68 |
| Prepaid expenses and accrued income | 226 | 231 |
| Total | 821 | 818 |
| Group | |||
|---|---|---|---|
| Accounts receivable | 31 Dec. 2016 |
31 Dec. 2015 |
|
| Accounts receivable | 539 | 502 | |
| Provisions for bad debts | -54 | -49 | |
| Total | 485 | 453 |
| Group | ||
|---|---|---|
| Provisions for bad debts | 2016 | 2015 |
| Provision for bad debts at the beginning of the year | -49 | -63 |
| Change in net impairment for the year | -15 | 0 |
| Change in provision, net in balance sheet | 12 | 12 |
| Translation difference, currency | -2 | 2 |
| Total | -54 | -49 |
| Group | |||
|---|---|---|---|
| Receivables that are past due but not impaired | 31 Dec. 2016 |
31 Dec. 2015 |
|
| Accounts receivable | |||
| Receivables due between 0–30 days | 45 | 58 | |
| Receivables due between 31-60 days | 11 | 8 | |
| Receivables due longer than 60 days | 2 | 1 | |
| Total | 58 | 67 |
Fair value of accounts receivable agrees with the carrying amounts. Credit quality of unreserved receivables is assessed to be good.
Interest income on accounts receivable during the year was SEK 4 M (4).
| Group | Parent Company | |||
|---|---|---|---|---|
| 31 Dec. 2016 |
31 Dec. 2015 |
31 Dec. 2016 |
31 Dec. 2015 |
|
| Prepaid rents | 41 | 46 | – | 0 |
| Prepaid lease fees | 2 | 2 | 0 | – |
| Prepaid insurance | 3 | 3 | 1 | 1 |
| Accrued supplier bonus | 130 | 130 | – | – |
| Other interim receivables | 50 | 50 | 6 | 9 |
| Total | 226 | 231 | 7 | 10 |
| Group | Parent Company | |||
|---|---|---|---|---|
| 31 Dec. 2016 |
31 Dec. 2015 |
31 Dec. 2016 |
31 Dec. 2015 |
|
| Cash and bank balances | 291 | 295 | 163 | 210 |
| Total | 291 | 295 | 163 | 210 |
| Group | Parent Company | |||
|---|---|---|---|---|
| Long-term | 31 Dec. 2016 |
31 Dec. 2015 |
31 Dec. 2016 |
31 Dec. 2015 |
| Liabilities to credit institutions, bank borrowing |
1,327 | 1,462 | 1,324 | 1,460 |
| Liabilities to leasing companies | 1 | 1 | – | – |
| Derivatives, interest-rate swaps | 7 | 3 | – | – |
| Total long-term liabilities, interest-bearing |
1,334 | 1,466 | 1,324 | 1,460 |
| Group | Parent Company | |||
|---|---|---|---|---|
| Current | 31 Dec. 2016 |
31 Dec. 2015 |
31 Dec. 2016 |
31 Dec. 2015 |
| Liabilities to credit institutions, bank borrowing |
136 | 136 | 136 | 136 |
| Overdraft facilities | 265 | 323 | 265 | 323 |
| Liabilities to leasing companies | 2 | 2 | – | – |
| Total current liabilities, interest-bearing |
404 | 461 | 401 | 459 |
| Total borrowing | 1,738 | 1,927 | 1,725 | 1,919 |
| Overdraft facility limit | 609 | 627 | 609 | 627 |
| - of which, unutilised portion | 344 | 304 | 344 | 304 |
All interest rates, excluding interest-rate swaps, are variable or have a maximum fixed period of three months. During the financial year, the interest level varied up to just below 2 per cent. Interest-rate swaps have been entered into in an amount of SEK 450 M to hedge the cash flows in the loans Mekonomen AB has falling due in 2019.
Long-term interest-bearing liabilities decreased during the year, mainly as a result of repayments according to plan. SEK 136 M in loans were repaid during 2016. The Group's maturity structure is specified in Note 11.
Mekonomen AB's borrowing from banks is subject to certain conditions, known as covenants, all of which Mekonomen AB meets. The Group's long-term borrowing occurs mainly under credit frameworks with long-term lines of credits, but with short-term fixed-interest periods. The Group's interest payments pertaining to borrowing amounted to SEK 28 M (33). Refer also to the sensitivity analysis pertaining to interest-rate risks in the sensitivity analysis section in the Administration Report and in Note 37. Existing overdraft facilities are in SEK, NOK, EUR and DKK. Other loans are essentially in SEK.
| Group | Parent Company | |||
|---|---|---|---|---|
| 31 Dec. 2016 |
31 Dec. 2015 |
31 Dec. 2016 |
31 Dec. 2015 |
|
| Provision for restructuring | – | 14 | – | – |
| Provision for pensions | 4 | 4 | – | – |
| Provisions for supplementary pur chase considerations |
13 | – | – | – |
| Other provisions | 10 | 6 | 2 | 2 |
| Total | 27 | 24 | 2 | 2 |
| Res tructuring |
Other pro visions |
|
|---|---|---|
| Carrying amount at the beginning of the year | 14 | 6 |
| Recognised in the income statement: | ||
| - New provisions | 0 | 4 |
| - Reversed provisions | 0 | 0 |
| Amounts utilised during the period | -14 | 0 |
| Currency effects | 0 | 0 |
| Carrying amount at year-end | 0 | 10 |
Provisions comprise:
| Group | Parent Company | |||
|---|---|---|---|---|
| 31 Dec. 2016 |
31 Dec. 2015 |
31 Dec. 2016 |
31 Dec. 2015 |
|
| Long-term portion | 27 | 10 | 2 | 2 |
| Short-term portion | – | 14 | 0 | 0 |
| Total | 27 | 24 | 2 | 2 |
The ITP 2 scheme's defined-benefit pension obligations for old-age and family pensions (or family pension) for salaried employees in Sweden are secured through insurance with Alecta. According to a statement from the Swedish Financial Reporting Board, UFR 10 Recognition of ITP 2 Pension Plans Financed through Insurance with Alecta, this is a multi-employer defined-benefit plan. In the 2016 financial year, the company did not have access to such information that made it possible to recognise its proportional share of the plan's obligations, plan assets and costs, which means that it was not possible to recognise this as a defined-benefit plan. ITP 2 pension plans that are secured through insurance with Alecta are therefore recognised as defined-contribution plans. The anticipated fees for the next reporting period for ITP 2 policies signed with Alecta amounts to SEK 14 M (14).
The collective consolidation level comprises the market value of Alecta's assets as a percentage of insurance commitments calculated according to Alecta's actuarial methods and assumptions, which are not in agreement with IAS 19. Alecta's surplus, in the form of the collective consolidation level, amounted to 149 per cent (153) at year-end 2016.
All pension commitments pertain to employees in the subsidiary in Norway. The Group is obliged to provide pension provisions according to the Norwegian act on occupational pensions. The Group has a total of five defined-benefit pension plans which jointly include 57 (63) gainfully employed individuals and 50 (47) pensioners. Pension benefits are largely dependent on the number of years of service, salary level at retirement and the amount of the benefit. This obligation is covered via insurance companies. Employer contributions are included in the net pension obligation. The amounts recognised in the balance sheet have been calculated as follows:
| Group | |||
|---|---|---|---|
| 31 Dec. 2016 |
31 Dec. 2015 |
||
| Present value of funded commitments | 54 | 46 | |
| Fair value of plan assets | -50 | -42 | |
| Deficit in funded plans | 4 | 4 | |
| Present value in unfunded commitments | – | – | |
| Net debt in the balance sheet | 4 | 4 | |
| Group | |||
| Present value of commitments | 2016 | 2015 | |
| Opening balance | 46 | 52 | |
| Gross pension cost for the year | 3 | 3 | |
| Interest expenses | 0 | 0 | |
| Pension payment | -2 | -2 | |
| Actuarial gains and losses1) | 2 | -2 | |
| Exchange-rate differences | 5 | -5 | |
| Closing balance | 54 | 46 | |
| Group | |||
| Fair value of plan assets | 2016 | 2015 |
| Fair value of plan assets | 2016 | 2015 |
|---|---|---|
| Opening balance | 42 | 44 |
| Expected return | 1 | 1 |
| Payments | 3 | 3 |
| Pension payment | -2 | -2 |
| Actuarial gains and losses1) | 1 | 0 |
| Exchange-rate differences | 5 | -4 |
| Closing balance | 50 | 42 |
| Net pension commitments | 4 | 4 |
1) Changes in demographic and financial assumptions are not specified on the basis of a materiality assessment.
| Group | ||
|---|---|---|
| Costs recognised in profit or loss | 2016 | 2015 |
| Pension vesting for the year including contributions | 2 | 3 |
| Administration fees | 0 | 0 |
| Interest expenses | 0 | 0 |
| 2 | 3 |
| Group | |||
|---|---|---|---|
| Composition of plan assets | 31 Dec. 2016 |
31 Dec. 2015 |
|
| Equities | 10% | 9% | |
| Bonds | 71% | 74% | |
| Property | 13% | 14% | |
| Other | 6% | 3% | |
| Total | 100% | 100% |
| Group | |||
|---|---|---|---|
| Actuarial assumptions | 31 Dec. 2016 |
31 Dec. 2015 |
|
| Discount rate | 2.10% | 2.50% | |
| Future salary increases | 2.25% | 2.50% | |
| Future pension increases | 0.00% | 0.00% |
Assumptions regarding future length of life are based on public statistics and experience from mortality studies in the country concerned, and set in consultation with actuarial experts.
Through its post-employment defined-benefit pension plans, the Group is exposed to a number of such risks as asset volatility, changes in returns and length of life commitments. The company actively monitors how terms of and expected returns on investments match expected payments arising from its pension commitments. The Group has not changed the processes used to manage its risks from previous periods. The Group does not use derivative instruments to manage its risk. Investments are highly diversified.
Contributions to post-employment benefit plans for the 2017 financial year are expected to amount to SEK 3 M.
A sensitivity analysis and weighted average term for the pension commitments and term analysis for undiscounted payments have not been provided since they are deemed to be insignificant.
| Group | |||
|---|---|---|---|
| 31 Dec. 2016 |
31 Dec. 2015 |
||
| Accounts payable | 612 | 540 | |
| Other liabilities | 120 | 137 | |
| Accrued expenses and deferred income | 373 | 313 | |
| Total | 1,105 | 990 |
| Group | Parent Company | |||
|---|---|---|---|---|
| 31 Dec. 2016 |
31 Dec. 2015 |
31 Dec. 2016 |
31 Dec. 2015 |
|
| Accrued personnel-related costs | 213 | 198 | 19 | 12 |
| Accrued bonuses/contract fees | 79 | 67 | – | – |
| Accrued interest expenses | 1 | 2 | 1 | 2 |
| Prepaid rental income | 6 | 7 | – | – |
| Other interim liabilities | 74 | 39 | 2 | 1 |
| Total | 373 | 313 | 22 | 15 |
| Group | Parent Company | |||
|---|---|---|---|---|
| 31 Dec. 2016 |
31 Dec. 2015 |
31 Dec. 2016 |
31 Dec. 2015 |
|
| Pledged assets | ||||
| Other pledged assets | – | – | – | – |
| Total | – | – | – | – |
| Contingent liabilities | ||||
| Guarantee commitments, divested properties |
22 | 22 | 22 | 22 |
| Other guarantee commitments1) | 171 | 11 | – | – |
| Guarantees on behalf of subsidiaries2) | – | – | 519 | 73 |
| Other sureties | 19 | 9 | – | – |
| Total | 211 | 41 | 541 | 95 |
1) The increase for the Group primarily pertains to a guarantee provided for investment in a new central warehouse system.
2) The increase for the Parent Company is primarily related to a guarantee provided on behalf of subsidiaries regarding investment in a new central warehouse system and for future premises rents.
For information on commitments regarding future lease charges and investment commitments, refer to Note 14.
| Parent Company | |||
|---|---|---|---|
| 2016 | 2015 | ||
| Opening cost | 3,551 | 3,542 | |
| Capital contributions paid | 35 | 9 | |
| Closing accumulated cost | 3,586 | 3,551 | |
| Opening impairment | -546 | -511 | |
| Impairment1) | -28 | -35 | |
| Closing accumulated impairment | -574 | -546 | |
| Closing residual value | 3,012 | 3,004 |
1) Impairment mainly pertains to Acem A/S i Danmark (formerly Mekonomen A/S) corresponding to SEK -28 M (-26).
| Name of company/registered office, Sweden | Corp. ID number |
Share of equity, % | Number of stores |
Book value 31 Dec. 2016 |
Book value 31 Dec. 2015 |
|---|---|---|---|---|---|
| MECA Scandinavia AB/Malmö | 556218-3037 | 100 | 2,033 | 2,033 | |
| Mekonomen Group AB/Stockholm | 556724-9254 | 100 | 35 | 0 | |
| Mekonomen Grossist AB/Stockholm | 556062-4875 | 100 | 40 | 40 | |
| Mekonomen Detaljist AB/Stockholm | 556157-7288 | 100 | 30 | 5 | 5 |
| Meko Service Nordic AB/Stockholm | 556179-9676 | 100 | 1 | 1 | |
| Mekonomen Fleet AB/Stockholm | 556720-6031 | 100 | 2 | 2 | |
| Speedy Autoservice AB/Malmö | 556575-9858 | 100 | 31 | 31 | |
| Mekonomen Nya Affärer AB/Stockholm | 556821-5981 | 100 | 0 | 0 | |
| Mekonomen Services AB/Stockholm | 556840-9428 | 100 | 0 | 0 | |
| Name of company/registered office, Finland | |||||
| Mekonomen Oy/Helsinki | 2259452-4 | 100 | 0 | 0 | |
| Name of company/registered office, Denmark | |||||
| Acem A/S/Copenhagen | 30 07 81 28 | 100 | 0 | 28 | |
| Name of company/registered office, Norway | |||||
| Mekonomen AS/Oppegård | 980 748 669 | 100 | 29 | 24 | 24 |
| Sørensen og Balchen AS/Oslo | 916 591 144 | 100 | 840 | 840 | |
| Participations in Group companies, total | 59 | 3,012 | 3,004 |
In Mekonomen Sweden, 35 wholly owned store companies were merged into the parent company Mekonomen Detaljist AB and in Mekonomen Norway, 29 wholly owned store companies were merged into the parent company Mekonomen AS. During the year, five wholly owned store companies in Sørensen og Balchen were merged into Bilvarehusene Sør AS. In Denmark, liquidation of Mekonomen Grossist
| Indirect participations in subsidiaries | Corp. ID number |
Share of equity, % |
Num ber of stores |
|---|---|---|---|
| MECA | |||
| MECA Car Parts AB/Malmö | 556169-0412 | 100 | – |
| MECA Sweden AB/Malmö | 556356-5612 | 100 | 51 |
| MECA Bilservice i Köping AB/Malmö | 559012-2478 | 100 | – |
| MECA Norway AS/Gjøvik, Norway | 935 682 525 | 100 | 24 |
| MECA Tunga Fordon AB/Malmö | 559009-7837 | 100 | – |
| Opus Equipment AB/Gothenburg | 556884-6504 | 100 | – |
| ProMeister Equipment AS/Gjøvik, Norway | 816 479 932 | 100 | – |
| J&B Maskinteknik AB/Gothenburg | 556490-2996 | 100 | |
| J&B Maskinteknikk AS/Gjøvik, Norway | 915 971 865 | 100 | |
| Opus Instrument (Foshan) Co. Ltd/Foshan, China |
44 060 040 000 987 | 100 | – |
| Opus Asia Ltd/Hong Kong | 1 077 601 | 100 | – |
| ProMeister Solutions AB/Malmö | 559034-6929 | 100 | – |
| ProMeister Solutions AS/Gjøvik, Norway | 917 100 462 | 100 | – |
| ProMeister Sweden AB/Malmö | 556509-7861 | 100 | |
| Denmark | 75 | ||
| Mekonomen Grossist Danmark A/S/Odense | 33 38 01 27 | 100 | – |
| 0 | |||
| Mekonomen Finland1) | |||
| Mekonomen Viiki Oy/Helsinki | 2359722-5 | 100 | – |
| Mekonomen Tammisto Oy/Vantaa | 2359731-3 | 100 | 1 |
| Mekonomen Renkomäki Oy/Lahti | 2429678-2 | 100 | 1 |
| Mekonomen Levänen Oy/Kuopio | 2462875-9 | 100 | 1 |
| Mekonomen Grossist Oy/Vantaa | 2445185-0 | 100 | – |
| 3 |
1) All companies in Finland have their registered offices in Helsinki; the place of business is stated above.
| Mekonomen ehf./Gardabaer | 411214-0520 | 100 | – |
|---|---|---|---|
| Mekonomen Gardabae ehf./Gardabaer | 411214-0790 | 71 | 1 |
| 1 | |||
| Mekonomen Sweden1) | |||
| Mekonomen Alingsås AB/Alingsås | 556596-3690 | 95 | 1 |
| Mekonomen Arvika AB/Arvika | 556528-3750 | 100 | 5 |
| Mekonomen B2C AB/Stockholm | 556767-7405 | 100 | – |
| Mekonomen Backaplan AB/Gothenburg | 556226-1338 | 100 | 1 |
| Mekonomen Bilverkstad AB/Stockholm | 556607-1493 | 100 | – |
| Mekonomen Blekinge AB/Sölvesborg | 556649-9017 | 91 | 4 |
| Mekonomen Bollnäs AB/Bollnäs | 556827-3675 | 91 | 1 |
| Mekonomen Båstad AB/Båstad | 556594-1951 | 100 | 1 |
| Mekonomen Enköping AB/Enköping | 556264-2636 | 91 | 1 |
| Mekonomen Eskilstuna AB/Eskilstuna | 556613-5637 | 100 | 1 |
| Mekonomen Falkenberg AB/Falkenberg | 556213-1622 | 91 | 1 |
| Mekonomen Falköping AB/Falköping | 556272-1497 | 100 | 1 |
| Mekonomen Falun AB/Falun | 556559-3927 | 100 | 2 |
| Mekonomen FKV AB/Stockholm | 556775-9831 | 100 | – |
| Mekonomen Flen AB/Flen | 556769-8542 | 100 | 2 |
| Mekonomen Butikerna AB/Halmstad | 556261-4676 | 100 | 1 |
| Mekonomen Gränby AB/Uppsala | 556821-6062 | 100 | – |
| Mekonomen Gärdet AB/Stockholm | 556821-6104 | 100 | – |
| Mekonomen Gärdet Café AB/Stockholm | 556840-9436 | 100 | – |
| Mekonomen Gävle AB/Gävle | 556353-6803 | 100 | 1 |
| Mekonomen Hedemora AB/Hedemora | 556308-8011 | 100 | 1 |
| Mekonomen Härnösand AB/Härnösand | 556217-2261 | 80 | 1 |
| Mekonomen Hässleholm AB/Hässleholm | 556678-0622 | 91 | 1 |
| Mekonomen Högsbo AB/Gothenburg | 556887-1999 | 51 | 1 |
| Mekonomen Jönköping AB/Jönköping | 556237-5500 | 100 | 1 |
| Mekonomen Kalmar AB/Kalmar | 556236-8349 | 100 | 1 |
| Mekonomen Karlstad AB/Karlstad | 556786-9457 | 100 | – |
| Mekonomen Katrinelund AB/Malmö | 556530-7237 | 100 | – |
| Mekonomen Kramfors AB/Kramfors | 556496-1810 | 91 | 1 |
| Mekonomen Kristianstad AB/Kristianstad | 556171-9203 | 100 | 1 |
|---|---|---|---|
| Mekonomen Kungsbacka AB/Kungsbacka | 556887-2336 | 51 | 1 |
| Mekonomen Lidköping AB/Lidköping | 556761-3012 | 75 | 1 |
| Mekonomen Linköping AB/Linköping | 556202-9545 | 100 | 2 |
| Mekonomen Ljusdal AB/Ljusdal | 556786-1066 | 100 | 2 |
| Mekonomen Ludvika AB/Ludvika | 556470-4210 | 100 | 1 |
| Mekonomen Luleå AB/Luleå | 556338-4071 | 100 | 2 |
| Mekonomen Lund AB/Lund | 556531-0108 | 91 | 1 |
| Mekonomen Lycksele AB/Lycksele | 556687-8095 | 75 | 1 |
| Mekonomen Mariestad AB/Mariestad | 556261-0179 | 75 | 1 |
| Mekonomen Mjölby AB/Mjölby | 556362-0565 | 100 | 1 |
| Mekonomen Mora AB/Mora | 556363-2487 | 100 | 1 |
| Mekonomen Motala AB/Motala | 556311-8750 | 100 | 1 |
| Mekonomen Mölndal AB/Mölndal | 556887-2294 | 51 | – |
| Mekonomen Norrköping AB/Norrköping | 556376-2797 | 100 | 2 |
| Mekonomen Norrtälje AB/Stockholm | 556178-9719 | 60 | 1 |
| Mekonomen Nyköping AB/Nyköping | 556244-0650 | 75 | 1 |
| Mekonomen Nässjö AB/Nässjö | 556187-8637 | 100 | 1 |
| Mekonomen Osby AB/Osby | 556408-8044 | 91 | 1 |
| Mekonomen Oskarshamn AB/Oskarshamn | 556631-8589 | 75 | 1 |
| Mekonomen Piteå AB/Piteå | 556659-8966 | 100 | 1 |
| Mekonomen Sala AB/Sala | 556882-0905 | 100 | 1 |
| Mekonomen Sandviken AB/Sandviken | 556201-1295 | 100 | 1 |
| Mekonomen Segeltorp AB/Huddinge | 556580-2351 | 100 | – |
| Mekonomen Skellefteå AB/Skellefteå | 556389-4095 | 100 | 1 |
| Mekonomen Sollefteå AB/Sollefteå | 556216-9424 | 80 | 1 |
| Mekonomen Strömstad AB/Strömstad | 556775-9849 | 100 | 1 |
| Mekonomen Sundsvall Birsta AB/Sundsvall | 556201-1675 | 100 | 1 |
| Mekonomen Sundsvall Nacksta AB/Sundsvall | 556777-4863 | 100 | 1 |
| Mekonomen Södertälje AB/Södertälje | 556405-5498 | 100 | 1 |
| Mekonomen Sölvesborg AB/Sölvesborg | 556216-4250 | 100 | – |
| Mekonomen Torslanda AB/Gothenburg | 556583-3893 | 100 | 1 |
| Mekonomen Tranås AB/Tranås | 556770-0041 | 100 | 1 |
| Mekonomen Trollhättan AB/Trollhättan | 556515-0298 | 100 | 2 |
| Mekonomen Umeå AB/Umeå | 556483-3084 | 81.8 | 1 |
| Mekonomen Valdemarsvik AB/Valdemarsvik | 556963-4966 | 100 | 1 |
| Mekonomen Varberg AB/Varberg | 556261-0161 | 75 | 1 |
| Mekonomen Verkstadscenter Älvsjö AB/ | |||
| Huddinge Mekonomen Vetlanda AB/Vetlanda |
556192-0314 | 91 | 1 |
| Mekonomen Vimmerby AB/Vimmerby | 556653-4219 | 91 | 1 |
| Mekonomen Vänersborg AB/Vänersborg | 556232-5877 | 100 | 1 |
| Mekonomen Värnamo Norra AB/Värnamo | 556770-0058 | 91 | 1 |
| Mekonomen Västerås AB/Västerås | 556530-9266 | 100 | 1 |
| Mekonomen Växjö AB/Växjö | 556344-5492 | 100 | 2 |
| Mekonomen Örnsköldsvik AB/Örnsköldsvik | 556192-0439 | 100 | 3 |
| 556465-6287 | 51 | 1 | |
| Mekonomen Östersund AB/Östersund | 556296-5243 | 100 | 2 |
| Marinshopen RM AB/Stockholm | 556829-5066 | 100 | 1 |
| 1) Includes the Marinshopen store | 83 | ||
| Mekonomen Norway | |||
| Motor Norge AS/Alta | 945 481 668 | 51 | 1 |
| Mekonomen Kongsberg AS/Kongsberg | 937 161 786 | 75 | 1 |
| Mekonomen Tønsberg AS/Tønsberg | 934 256 867 | 75 | 1 |
| Mekonomen Services AS/Oppegård | 999 323 332 | 100 | – |
| Mekonomen Bilservice AS/Oppegård | |||
| 917 606 285 | 100 | – | |
| Mekonomen Bilservice Rasta AS/ Oppegård |
817 970 532 | 51 | – |
| Lasingoo Norge AS/Oppegård | 914 835 585 | 100 | – |
| Total number of stores | 261 | ||
|---|---|---|---|
| 0 | |||
| ProMeister Global Limited/Hong Kong | 1988735 | 100 | – |
| Hong Kong | 0 | ||
| Meko Service Råå AB/Upplands-Väsby | 559086-6744 | 80 | – |
| Meko Service Södra AB/Upplands-Väsby | 559086-6645 | 80 | – |
| Mekonomen BilLivet Krokslätt AB/ Gothenburg |
559055-8549 | 100 | – |
| Meko Service Tyresö AB/Stockholm | 556961-2319 | 100 | – |
| AB/Upplands-Väsby | 556964-0641 | 60 | – |
| Meko Service Susannes Bilverkstad i Härlöv | |||
| Meko Service Hemmesta AB/Upplands-Väsby | 556428-1102 | 100 | – |
| Speedy Bilservice Mölndal AB/Mölndal | 559004-5711 | 51 | – |
| Speedy Bilservice Östermalm AB/Malmö | 556953-2434 | 91 | – |
| Promotor Åkersberga AB/Stockholm | 556819-5019 | 100 | – |
| Mekonomen BilLivet Gärdet AB/ Upplands-Väsby |
556821-6047 | 100 | – |
| Mekonomen BilLivet Backaplan AB/Gothenburg | 556756-1146 | 91 | – |
| Mekonomen BilLivet Täby AB/Stockholm | 556882-0962 | 91 | – |
| Mekonomen BilLivet Södertälje AB/Stockholm | 556882-0939 | 100 | – |
| Upplands-Väsby | 556909-4906 | 100 | – |
| Upplands-Väsby Mekonomen BilLivet Högsbo AB/ |
556863-9909 | 91 | – |
| Stockholm Mekonomen BilLivet Sisjön AB/ |
556882-0954 | 91 | – |
| Stockholm Mekonomen BilLivet Katrinelund AB/ |
556882-0780 | 100 | – |
| Mekonomen BilLivet Johanneshov AB/ | 556864-3471 | 100 | – |
| Mekonomen BilLivet Infra City AB/Stockholm | 556882-0947 | 91 | – |
| Mekonomen BilLivet Haninge AB/Stockholm | 556864-3448 | 100 | – |
| Mekonomen BilLivet Gävle AB/Stockholm | 556864-3455 | 100 | – |
| Mekonomen BilLivet Bromma AB/Stockholm | 556882-0772 | 100 | – |
| Meko Service Auto Mek i Karlskrona AB/ Stockholm |
|||
| Sweden – Meko Service Nordic Mekonomen BilLivet AB/Stockholm |
556845-2196 | 100 | – |
| 916 795 521 | 100 | – 37 |
|
| BilXtra Fåvang AS/Ringebu | 914 746 345 | 80 | – |
| DINDEL NORWAY AS/Oslo BilXtra Autogården Kongsberg AS/Kongsberg |
913 284 607 | 100 | – |
| Autoproducts AS/Trondheim | 995 080 125 | 50 | 1 |
| Vest Bilutstyr AS/Bergen | 980 281 450 | 100 | 2 |
| Høistad Bildeler AS/Lillehammer | 981 015 142 | 100 | 1 |
| Bilvarehusene Sør AS/Oslo | 887 813 752 | 100 | 6 |
| 885 049 702 | 100 | 2 | |
| Askim Bilrekvisita AS/Askim | 935 614 031 | 91 | 1 |
| Jahre Motor Hamar AS/Hamar | 936 043 119 | 100 | 2 |
| Rogaland Rekvisita AS/Stavanger | 961 171 067 | 100 | |
| Bilutstyr Arendal AS/Arendal | 1 | ||
| BilXtra AS/Oslo | 983 032 133 | 100 | 6 |
| Bilvarehusene Nor AS/Oslo | 999 255 876 880 553 852 |
91 100 |
1 9 |
| Rønneberg Auto Industri AS/Ålesund BilXtra Kristiansund AS/Kristiansund |
981 015 150 | 100 | 5 |
Including the Parent Company, Mekonomen Group comprises a total of 158 companies, 261 proprietary stores and 33 proprietary workshops. Currently, 56 wholly-owned companies run 226 stores and 32 partly-owned companies run 35 stores. Furthermore, 15 wholly-owned companies and 12 partly-owned companies run 33 workshops.
The Group has no subsidiary with non-controlling interests that is of individual significance to Mekonomen Group.
3
The amounts recognised in the balance sheet comprise the following:
| Group | |||
|---|---|---|---|
| 31 Dec. 2016 |
31 Dec. 2015 |
||
| Associated companies | 0 | 0 | |
| Joint ventures | 2 | 2 | |
| Total | 2 | 2 |
The amounts recognised in profit or loss comprise the following:
| Group | ||||
|---|---|---|---|---|
| 2016 | 2015 | |||
| Associated companies | 0 | 0 | ||
| Joint ventures | 0 | 0 | ||
| Total | 0 | 0 |
Holdings in joint ventures and associated companies are recognised in accordance with the equity method. The Group has only one small associated company and a small joint venture with an immaterial impact on the Group.
A specification of changes to shareholders' equity can be found in the statement of changes in consolidated and Parent Company's shareholders' equity (see pages 51 and 56, respectively).
At the end of the financial year, share capital amounted to SEK 89,754 (89,754) thousand and comprised 35,901,487 shares (35,901,487) at a quotient value of SEK 2.50 per share (2.50).
There were no outstanding shareholders' equity instruments that could result in a dilution of the share capital as per 31 December 2016 and 31 December 2015.
Other capital contributions included contributions the company received from shareholders and which are not recognised as share capital.
| Other capital contributions | |
|---|---|
| Opening balance on 1 January 2015 | 1,456 |
| Closing balance on 31 December 2015 | 1,456 |
| Opening balance on 1 January 2016 | 1,456 |
| Closing balance on 31 December 2016 | 1,456 |
The item consists of translation differences attributable to the translation of foreign subsidiaries in accordance with IAS 21 and cash-flow hedges as shown in the table below:
| Reserves | Translation differences1) |
Hedges | Total |
|---|---|---|---|
| Opening balance on 1 January 2015 | -144 | -1 | -145 |
| Exchange-rate differences on translation of foreign subsidiaries |
-88 | – | -88 |
| Cash-flow hedges | – | -1 | -1 |
| Closing balance on 31 December 2015 | -232 | -2 | -234 |
| Opening balance on 1 January 2016 | -232 | -2 | -234 |
| Exchange-rate differences on translation of foreign subsidiaries |
104 | – | 104 |
| Cash-flow hedges | – | -4 | -4 |
| Closing balance on 31 December 2016 | -128 | -6 | -134 |
1) At 31 December 2016, the accumulated translation reserve regarding Denmark amounted to SEK -14 M (-17). The translation reserve for Denmark will be reclassified within shareholders' equity through profit and loss to the amount current at the time when the Danish company is liquidated. For additional information regarding discontinued operations, refer to Note 34.
The profit brought forward item corresponds to the accumulated profits and losses generated in total in the Group.
| Opening balance on 1 January 2015 | 665 |
|---|---|
| Comprehensive income for the year: | |
| - Profit for the year | 423 |
| - Actuarial gains and losses | 2 |
| Comprehensive income for the year | 424 |
| Dividends | -251 |
| Acquisition/divestment of non-controlling interests | -7 |
| Closing balance on 31 December 2015 | 831 |
| Opening balance on 1 January 2016 | 831 |
| Comprehensive income for the year: | |
| - Profit for the year | 335 |
| - Actuarial gains and losses | -1 |
| Comprehensive income for the year | 334 |
| Dividends | -251 |
| Acquisition/divestment of non-controlling interests | -14 |
| Closing balance on 31 December 2016 | 900 |
The Board of Directors proposes a dividend of SEK 7.00 per share (7.00), leading to a total dividend of SEK 251,310,409 (251,310,409).
| The following profit is at the disposal of the Annual General Meeting, SEK 000s: |
|
|---|---|
| Profit brought forward | 2,430,987 |
| Profit for the year | 117,591 |
| TOTAL | 2,548,578 |
| TOTAL 2,548,578 |
|
|---|---|
| To be carried forward | 2,297,268 |
| Dividend to shareholders (SEK 7.00 per share) | 251,310 |
Mekonomen Group manages its capital to ensure that the units in the Group are able to continue operating, while dividends to shareholders are maximised through a sound balance between liabilities and shareholders' equity. The Group's capital comprises shareholders' equity, as well as short and long-term borrowing. The proportions of shareholders' equity and changes during the year are described in the changes in consolidated shareholders' equity on page 51 and Note 28 Shareholders' equity.
At least once per year, the Board reviews the capital structure and takes this into account when making decisions on, for example, dividends or raising new loans. The key figure company management primarily assesses regarding capital structure is net debt relative to EBITDA. This key figure is continuously followed up in the internal reporting to Group Management and the Board. As of 2016, Mekonomen Group's financial targets include that net debt/EBITDA shall not exceed 2.0 over the long term. In addition, the long-term equity/assets ratio shall not be less than 40 per cent.
| Group | Parent Company | |||
|---|---|---|---|---|
| 2016 | 2015 | 2016 | 2015 | |
| Depreciation/Amortisation | 173 | 167 | 0 | 0 |
| Impairment of tangible fixed assets | 2 | – | – | – |
| Impairment of financial fixed assets | 1 | 2 | 28 | 35 |
| Other provisions | 0 | 5 | 0 | 2 |
| Capital gain/loss from divestment of fixed assets |
1 | 2 | – | – |
| Capital gain/loss from divestment of operations |
23 | 0 | – | – |
| Other items not affecting liquidity | -4 | 12 | -6 | 0 |
| 196 | 188 | 21 | 37 |
Cash flow pertains to total operations, i.e. both continuing and discontinued operations.
MECA acquired one store in Höör, Sweden and two partner stores in Tomelilla and Charlottenberg, Sweden, established Opus Equipment in Norway and acquired a customer portfolio for oil sales to industrial customers in Norway.
Mekonomen Sweden acquired non-controlling interests in 11 stores, all for a minor value. Mekonomen Sweden also acquired a partner store in Halmstad and established a store in Älmhult.
Mekonomen Norway acquired a workshop in Drammen, Norway.
Sørensen og Balchen established two stores in Norway, one in Stord and one in Trysil.
Meko Service Nordic acquired three workshops in Sweden, one in Mölndal and two in Helsingborg. Meko Service Nordic also acquired non-controlling interests in three workshops in Sweden, all for a minor value.
Relative to the comparative period, Opus Equipment AB, which was acquired on 1 July 2015, impacted the Group's net sales by SEK 54 M, and EBIT negatively by SEK 4 M. The impact of other acquisitions on consolidated sales and earnings was marginal.
Information on corporate acquisitions is provided in aggregate form since each individual acquisition is not deemed to be of such a size as to warrant separate recognition. All acquisitions were paid in cash.
Acquisitions in 2016 Total acquisitions Value of acquired assets and liabilities Tangible fixed assets 2 Inventories 3 Current receivables 0 Current liabilities 0 Acquired net assets 5 Customer relations 21 Goodwill 5 Deferred tax liabilities 0 Acquired non-controlling interests, surplus value recognised against shareholders' equity 14 Total identifiable net assets and goodwill 45 Total purchase price -45 - of which, cash portion -31 - of which supplementary purchase considerations -14 Cash and cash equivalents in the acquired companies 0 Impact on Group's cash and cash equivalents -31
One workshop manager entered as a partner in the workshop company during the year.
| Participa ting interest and share |
||||
|---|---|---|---|---|
| Acquired subsidiaries/ operations 2016 |
Country | Acquisi tion date |
of voting rights |
Object |
| Partner store, Halmstad - Mekonomen Sweden |
Sweden | Quarter 1 | 100 | Assets and liabilities |
| Store, Höör - MECA | Sweden | Quarter 1 | 100 | Assets and liabilities |
| Partner store, Tomelilla - MECA | Sweden | Quarter 2 | 100 | Assets and liabilities |
| Partner store, Charlottenberg - MECA |
Sweden | Quarter 2 | 100 | Assets and liabilities |
| Customer portfolio for oil sales to industrial customers, MECA |
Norway | Quarter 2 | 100 | Assets and liabilities |
| Workshop, Mölndal - Meko Service Nordic |
Sweden | Quarter 2 | 100 | Assets and liabilities |
| Workshop, Drammen - Mekonomen Norway |
Norway | Quarter 3 | 100 | Assets and liabilities |
| Workshop, Helsingborg - Meko Service Nordic |
Sweden | Quarter 4 | 100 | Assets and liabilities |
| Workshop, Helsingborg/Råå - Meko Service Nordic |
Sweden | Quarter 4 | 100 | Assets and liabilities |
MECA acquired Opus Equipment AB, a comprehensive supplier of workshop equipment for workshops and car inspection stations. Delivery of workshop equipment is a new business in Mekonomen Group that offers equipment with installation and maintenance service to new and existing customers on the automotive aftermarket. The purchase price for the shares amounted to SEK 41 M and the assumed net debt was SEK 10 M. Consolidation of the company took place as of 1 July 2015 in Mekonomen Group. MECA also acquired a partner store and workshop in Köping, Sweden.
Mekonomen Nordic acquired non-controlling interests in 21 stores, 18 in Sweden and 3 in Norway, for a minor value. In Sweden, three partner stores in Kiruna, Linköping and Karlskrona were acquired, and three workshops in Härnösand, Ljusdal and Lidingö in Stockholm. Mekonomen Nordic also acquired a partner store in Iceland.
Sørensen og Balchen acquired all non-controlling interests in DinDel Norway and established a store in Mysen, Norway.
Meko Service Nordic acquired a workshop in Karlskrona and non-controlling interests in a workshop in Sweden.
The company acquired, Opus Equipment AB, impacted consolidated net sales in an amount of SEK 66 M, and EBITA in an amount of SEK 4 M and EBIT in an amount of SEK 3 M, excluding acquisition costs. The impact of other acquisitions on consolidated sales and earnings was marginal.
Information on corporate acquisitions is provided in aggregate form since each individual acquisition is not deemed to be of such a size as to warrant separate recognition. All acquisitions were paid in cash.
| Total acquisi | |
|---|---|
| Acquisitions in 2015 | tions |
| Value of acquired assets and liabilities | |
| Intangible fixed assets | 5 |
| Tangible fixed assets | 5 |
| Deferred tax assets | 2 |
| Inventories | 44 |
| Current receivables | 21 |
| Cash and cash equivalents | 1 |
| Long-term liabilities | -1 |
| Current liabilities | -37 |
| Acquired net assets | 40 |
| Customer relations | 12 |
| Goodwill | 16 |
| Deferred tax liabilities | -1 |
| Acquired non-controlling interests, surplus value recognised against shareholders' equity |
17 |
| Total identifiable net assets and goodwill | 84 |
| Total purchase price | -84 |
| - of which, cash portion | -84 |
| Cash and cash equivalents in the acquired companies | 1 |
| Impact on Group's cash and cash equivalents | 83 |
No store or workshop managers entered as part-owners in the respective store or workshop companies during the year.
| Acquired subsidiaries/ | Acquisi tion |
Partici pating interest and share of voting |
||
|---|---|---|---|---|
| operations 2015 | Country | date | rights | Object |
| Partner store, Kiruna - Mekonomen Nordic |
Sweden | Quarter 1 | 100 | Assets and liabilities |
| Partner store, Linköping - Mekonomen Nordic |
Sweden | Quarter 1 | 100 | Assets and liabilities |
| Partner store, Iceland - Mekonomen Nordic |
Iceland | Quarter 1 | 100 | Assets and liabilities |
| Workshop, Lidingö - Mekonomen Nordic |
Sweden | Quarter 1 | 100 | Assets and liabilities |
| Workshop, Härnösand - Mekonomen Nordic |
Sweden | Quarter 2 | 100 | Assets and liabilities |
| Workshop, Ljusdal - Mekonomen Nordic |
Sweden | Quarter 2 | 100 | Assets and liabilities |
| Partner store, Köping - MECA |
Sweden | Quarter 2 | 100 | Assets and liabilities |
| Workshop, Köping - MECA |
Sweden | Quarter 2 | 100 | Assets and liabilities |
| OPUS Equipment AB, Gothenburg - MECA |
Sweden | Quarter 3 | 100 | Company |
| Partner store, Karlskrona - Mekonomen Nordic |
Sweden | Quarter 4 | 51 | Assets and liabilities |
| Workshop, Karlskrona - Meko Service Nordic |
Sweden | Quarter 4 | 100 | Assets and liabilities |
During the year, the Parent Company Mekonomen AB sold products and services to Group companies totalling SEK 35 M (37). Purchases relating to goods and services from Group companies amounted to SEK 56 M (63).
In 2016, Mekonomen Group acquired goods and services at a value of SEK 5 M (2) from companies where Mekonomen Group has significant influence or joint controlling influence. Agreements on goods and services with related parties are made on market-based terms. There were no receivables from or liabilities to related parties as at the balance-sheet date. No other transactions with related parties took place. For information on remuneration of senior executives, refer to Note 5.
A decision on comprehensive structural changes and repositioning of the Group's Danish operations was made in December 2014. All of the stores, which were also local warehouses, and the Danish head office have been closed. The franchise workshops were retained and these then received their deliveries of spare parts directly from the regional and central warehouses, achieving efficient logistics without intermediaries in the distribution chain.
In March 2015, the last two stores in Denmark were closed, which is why the Danish store operations was discontinued as of this point in time. In view of the fact that the Danish store operations constituted a significant operating segment in a geographic area, it has been recognised and presented as a discontinued operation according to the rules in IFRS 5 as of the first quarter interim report of 2015. All comparable periods have been recalculated. The Danish store operations were previously a part of the MECA segment.
The consolidated income statement includes the discontinued store operations' profit taken up as an item under "Discontinued operations". This means that the discontinued operations have been excluded from all profit items in the consolidated income statement and that only the net profit from the discontinued operation has been stated on the line for profit from discontinued operations. The discontinued operation's cash flows are included in the consolidated cash flow statement and reported separately below. The consolidated balance sheet has not been recalculated.
At 31 December 2016, the accumulated translation reserve regarding Denmark amounted to SEK -14 M. The translation reserve for Denmark will be reclassified within shareholders' equity through profit and loss to the amount current at the time when the Danish company is liquidated.
Separate financial information is presented below with regard to the discontinued store operations in Denmark.
| Profit/loss and other comprehensive income from discontinued operations |
2016 | 2015 |
|---|---|---|
| Revenue | 0 | 36 |
| Expenses | 0 | -36 |
| Profit/loss from discontinued operations – before tax | 0 | 0 |
| Tax | 0 | 0 |
| Profit/loss from discontinued operations – after tax | 0 | 0 |
| Other comprehensive income: | ||
| Exchange-rate differences on translation of foreign | ||
| subsidiaries | 3 | -1 |
| Comprehensive income/loss from | ||
| discontinued operations | 3 | -1 |
| Cash flow from discontinued operations in summary |
2016 | 2015 |
|---|---|---|
| Cash flow from operating activities | -17 | -134 |
| Cash flow from investing activities | 5 | 29 |
| Cash flow from financing activities | 0 | 0 |
| Cash flow from discontinued operations | -12 | -105 |
Board members Caroline Berg and Mia Brunell Livfors made their positions available and at the Extraordinary General Meeting on 10 January 2017, in accordance with the proposal by LKQ, Joseph M. Holsten and John S. Quinn were elected as members of the company's Board of Directors. John S. Quinn was elected to be the Executive Vice Chairman.
The Board of Mekonomen AB appointed Pehr Oscarson the President and CEO of Mekonomen Group, effective as of 1 March 2017.
As stated in a press release on 6 March 2017, Per Hedblom is leaving the post of CFO at his own request for a new assignment with a different employer. The process of finding a new CFO for Mekonomen Group will begin immediately. Per Hedblom ends his position as CFO no later than September 2017.
No other significant events occurred after the end of the financial year.
The Annual Report and consolidated financial statements were approved for issue by the Board on 24 March 2017. The consolidated income statement, statement of comprehensive income and balance sheet and the Parent Company's income statement, statement of comprehensive income and balance sheet will be subject to approval by the Annual General Meeting on 25 April 2017.
Through its operations, Mekonomen Group is exposed to currency, credit, interestrate and financing and liquidity risks. The management of these risks is regulated in the finance policy adopted by the Board. Credit risk relating to customer commitments is managed, according to central frameworks, decentralised locally. Other risks are mainly managed centrally by the Group's Treasury unit.
Currency risks occur when currency fluctuations have a negative impact on the Group's earnings and shareholders' equity. Currency exposure arises in connection with cash flows in foreign currencies (transaction exposure), as well as in translation of loans/receivables in foreign currencies and in the translation of foreign subsidiaries' balance sheets and income statements into SEK (translation exposure).
In 2016, currency fluctuations had a positive impact on the Group's profit before tax totalling SEK -5 M (+8). The most important currency in terms of transaction exposure is EUR, which represents 37 per cent (37) of goods purchases in the Group, as well as NOK pertaining to internal sales from wholesale companies in Mekonomen Sweden and MECA to Norway. NOK is the most important currency with regard to translation exposure. The management of currency risks is regulated in the finance policy with a hedging period of between 0 and 3 months.
With regard to foreign shareholders' equity, the principal rule is that Mekonomen Group does not hedge this exposure. However, if major foreign investments are made that require separate financing, a decision may be made to recognise all or part of the financing in the acquisition currency. For more detailed information on currency exposure, refer also to the sensitivity analysis section in the Administration Report.
The Group's financial transactions give rise to credit risks in relation to financial counterparties. Credit risks or counterparty risks refer to the risk of loss if the counterparty does not fulfil its commitments. Mekonomen Group's credit risks primarily comprise accounts receivable, which are distributed over a large number of counterparties and a small portion of long-term hire-purchase contracts. For each new customer, or in the event an existing customer wants to increase the credit limit, a credit rating is conducted according to the Group's established policies. The maximum credit risk corresponds to the carrying amount of financial assets. Specifications of impairment of accounts receivable for the year and long-term hire-purchase contracts are found in Notes 16 and 18.
Interest-rate risks refer to the risk that changes in market interest rates will have a negative impact on the Group's net interest expense. The rate at which interest rate changes affect the net interest expense depends on the period of fixed interest for the loan. According to the finance policy, the fixed-interest period is normally to be 12 months, with an exception mandate of +6/-9 months.
As per 31 December 2016, Mekonomen's net debt is SEK 1,437 M (1,626). A fixed-interest period is available with a term of less than one year. In addition to this, there is an interest-rate swap of SEK 450 M to hedge the cash flows in the loans Mekonomen AB has falling due in 2019. See also the table in the Sensitivity analysis section of the Administration Report.
Financing risk is seen as the risk of the cost being higher and financing opportunities limited when loans are renewed and payment obligations cannot be met as a result of insufficient liquidity or difficulties in securing financing. According to the finance policy, refinancing risks are to be managed by signing long-term and flexible credit agreements.
As per 31 December 2016, the Group's total loan financing amounted to SEK 1,728 M (1,921), of which the long-term portion is SEK 1,327 M (1,462). The Group's borrowing from banks is subject to certain conditions, known as covenants, all of which Mekonomen AB meets.
See the maturity structure excluding amortisation in the graph below.
Maturity structure excluding amortisation.
Total amortisation of the loans is SEK 136 M per year. In addition, the Group has overdraft facilities totalling SEK 609 M (627). The Group's cash and cash equivalents are invested short term and any excess liquidity is to primarily be used for amortising loans. According to the finance policy, investments may be made in SEK, NOK, EUR and DKK. Investments may be made with or in securities issued by the Swedish Government or Swedish and foreign banks with at least an A rating, according to the definition of Standard & Poor's (S&P).
No financial assets or liabilities were recognised at a value that significantly deviated from fair value.
The Board of Directors and President hereby certify that the Annual Report was prepared in accordance with the Annual Accounts Act and RFR 2 and provides a true and fair view of the company's financial position and earnings and that the Administration Report provides a true and fair view of the performance of the company's operations, position and earnings and describes significant risks and uncertainty factors faced by the company.
The Board of Directors and President hereby certify that the consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS), as approved by the EU, and provide a true and fair view of the Group's financial position and earnings and that the Administration Report for the Group provides a true and fair view of the performance of the Group's operations, position and earnings and describes significant risks and uncertainty factors faced by the companies included in the Group.
Stockholm, 24 March 2017
Kenneth Bengtsson John S. Quinn Kenny Bräck Chairman of the Board Executive Vice Chairman Board member
Joseph M. Holsten Malin Persson Helena Skåntorp Christer Åberg
Board member Board member Board member Board member
Pehr Oscarson President and CEO
Our Auditor's Report was submitted on 27 March 2017 PricewaterhouseCoopers AB
Lennart Danielsson Authorised Public Accountant
We have audited the annual accounts and consolidated accounts of Mekonomen AB (publ) for the year 2016. The annual accounts and consolidated accounts of the company are included on pages 33-82 in this document except for the corporate governance statement on pages 39-47.
In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of parent company as of 31 December 2016 and its financial performance and cash flow for the year then ended in accordance with the Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Annual Accounts Act and present fairly, in all material respects, the financial position of the group as of 31 December 2016 and their financial performance and cash flow for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and the Annual Accounts Act. Our opinions do not cover the corporate governance statement on pages 39-47. The statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts.
We therefore recommend that the general meeting of shareholders adopts the income statement and balance sheet for the parent company and the group.
We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.
We designed our audit by determining materiality and assessing the risks of material misstatement in the consolidated financial statements. In particular, we considered where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
We refer to note 3 and to the accounting principles.
Mekonomen's group revenues are comprised of a large number of sales transactions generated in approximately 300 stores and workshops all over Scandinavia, primarily in Sweden and Norway. The customers are comprised of both private individuals and companies. The majority of the transactions refer to sales against invoices, while a small portion is comprised of traditional cash sales.
Rebates, returns and complaints take place frequently and, as a result, have a major impact on reported revenue.
The operations are, in their nature, very transaction intensive and this places major demands on the reliability of the systems and processes. The revenue process is, naturally, dependent on effective and appropriate IT solutions.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the group operates.
The group audit has included all segments, where Meca and Mekonomen Sweden represent the largest portion of the group's net sales and results. Mekonomen Sweden's operations are undertaken through a large number of subsidiaries with a common financial management function. In our audit of these entities we executed uniform audit activities of routines and processes for, amongst other things, revenue recognition and inventory accounting. In addition to the audit of the parent company and of the consolidation, a large number of Swedish companies are also audited by the group team, with the group's auditor-in-charge as the signing auditor. For Meca, Sørensen og Balchen and Mekonomen Norway group team provide instructions for the audit to the respective entities. Furthermore, reporting has been obtained from our local audit teams concerning, amongst other things, the audit of internal control, a review of the third quarter and an audit of year end.
Mekonomen's interim report for the third quarter has been the subject of a review. This quarterly review helps us to identify and understand the changes in circumstances impacting the financial reporting.
Based on the executed audit activities mentioned above, we deem that we have obtained sufficient audit evidence to provide an opinion on the consolidated financial statements as a whole.
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall materiality for the financial statements as a whole. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Key audit matters of the audit are those matters that, in our professional judgment, were of most significance in our audit of the annual accounts and consolidated accounts of the current period. These matters were addressed in the context of our audit of, and in forming our opinion thereon, the annual accounts and consolidated accounts as a whole, but we do not provide a separate opinion on these matters.
We have mapped the sales processes and, in this manner, obtained an understanding of how revenues are generated and how they are reflected in the accounts and in financial reports.
Furthermore, the relevant IT systems have been tested as regards, amongst other things, change management, crisis management, authorisations and access rights.
Within the different sales processes there are controls which are undertaken by the operations in order to ensure a correct accounting. We have evaluated the design and tested the effectivity of those controls significant to the audit.
In addition to the evaluation and testing of controls, we have performed substantive procedures on revenues via so-called detailed testing, which implies that we execute a random sample testing of a selection of revenue transactions. We have also studied and evaluated the information provided in Notes 1 and 3
in the annual report.
On the basis of our audit, we have made no significant observations regarding revenue recognition.
We refer to Note 17 and the accounting principles.
The inventory comprises a significant portion of the group's assets and consists of finished goods inventory. The inventory is comprised of both Mekonomen's two central inventories and of approximately 260 store inventories. The group's inventory is, consequently, spread out over a large number of geographical locations in the countries in which Mekonomen has operations.
In order to ensure the existence of the inventories, Mekonomen executes ongoing stock-taking at the various inventory sites during the year. The value of the inventory is impacted by factors such as purchase prices and obsolescence.
Purchase prices are, in their turn, impacted by a high degree of contractual agreements with various suppliers as regards rebates and purchase bonuses which are based on achieved purchase volumes.
The existence of obsolescence requires that estimations and judgments are undertaken in valuing the inventory.
The operations are, in their nature, very transaction intensive and place major requirements on the reliability of the systems and processes. The inventory process is naturally dependent on effective and appropriate IT solutions.
Key audit matter How our audit addressed the Key audit matter
We have obtained an understanding of the inventory accounting through mapping the routines for inventory transactions and for the reporting of these transactions. We have formed an opinion as to the manner in which the financial reporting is impacted by the group's inventory.
Furthermore, the relevant IT systems have been tested with regard to, amongst other things, change management, crisis management, authorisations and access rights.
Within the inventory process, there are controls executed by the operations to ensure correct accounting. We have evaluated the design and tested the effectivity of those controls significant to the audit.
In order to ensure the existence of the inventory and its condition, we also participated in a selection of all of the stock-taking exercises executed by Mekonomen.
Furthermore, we have assessed the obsolescence provision in accordance with the obsolescence schedule applied within the Mekonomen group.
For the group's two central inventories, an additional activity was executed. A so-called data analysis was made implying that all inventory transactions were
sorted and analysed according to pre-determined, established parameters. We have also studied and evaluated the information provided in Notes 1 and 17 of the annual report.
On the basis of our audit, we have made no significant observations regarding the accounting of the inventory.
This document also contains other information than the annual accounts and consolidated accounts and is found on pages 1-32 and 86-91. The Board of Directors and the Managing Director are responsible for this other information.
Our opinion on the annual accounts and consolidated accounts does not cover this other information and we do not express any form of assurance conclusion regarding this other information.
In connection with our audit of the annual accounts and consolidated accounts, our responsibility is to read the information identified above and consider whether the information is materially inconsistent with the annual accounts and consolidated accounts. In this procedure we also take into account our knowledge otherwise obtained in the audit and assess whether the information otherwise appears to be materially misstated.
If we, based on the work performed concerning this information, conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
The Board of Directors and the Managing Director are responsible for the preparation of the annual accounts and consolidated accounts and that they give a fair presentation in accordance with the Annual Accounts Act and, concerning the consolidated accounts, in accordance with IFRS as adopted by the EU. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.
In preparing the annual accounts and consolidated accounts, The Board of Directors and the Managing Director are responsible for the assessment of the company's and the group's ability to continue as a going concern. They disclose, as applicable, matters related to going concern and using the going concern basis of accounting. The going concern basis of accounting is however not applied if the Board of Directors and the Managing Director intends to liquidate the company, to cease operations, or has no realistic alternative but to do so.
The Audit Committee shall, without prejudice to the Board of Director's responsibilities and tasks in general, among other things oversee the company's financial reporting process.
Our objectives are to obtain reasonable assurance about whether the annual accounts and consolidated accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts.
A further description of our responsibility for the audit of the annual accounts and consolidated accounts is available on Revisorsnämnden's website:
www.revisorsinspektionen.se/rn/showdocument/documents/rev_dok/revisors_ansvar.pdf. This description is part of the auditor's report.
In addition to our audit of the annual accounts and consolidated accounts, we have also audited the administration of the Board of Directors and the Managing Director of Mekonomen AB (publ) for the year 2016 and the proposed appropriations of the company's profit or loss.
We recommend to the general meeting of shareholders that the profit be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the Managing Director be discharged from liability for the financial year.
We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the Auditor's Responsibilities section. We are independent of the parent company and the group in accordance with professional ethics for accountants in Sweden and have otherwise fulfilled our ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.
The Board of Directors is responsible for the proposal for appropriations of the company's profit or loss. At the proposal of a dividend, this includes an assessment of whether the dividend is justifiable considering the requirements which the company's and the group's type of operations, size and risks place on the size of the parent company's and the group's equity, consolidation requirements, liquidity and position in general.
The Board of Directors is responsible for the company's organization and the administration of the company's affairs. This includes among other things continuous assessment of the company's and the group's financial situation and ensuring that the company's organization is designed so that the accounting, management of assets and the company's financial affairs otherwise are controlled in a reassuring manner. The Managing Director shall manage the ongoing administration according to the Board of Directors' guidelines and instructions and among other matters take measures that are necessary to fulfil the company's accounting in accordance with law and handle the management of assets in a reassuring manner.
Our objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Managing Director in any material respect:
Our objective concerning the audit of the proposed appropriations of the company's profit or loss, and thereby our opinion about this, is to assess with reasonable degree of assurance whether the proposal is in accordance with the Companies Act.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the company, or that the proposed appropriations of the company's profit or loss are not in accordance with the Companies Act.
A further description of our responsibility for the audit of the administration is available on Revisorsnämnden's website: www.revisorsinspektionen.se/rn/showdocument/documents/rev_dok/revisors_ansvar.pdf. This description is part of the auditor's report.
The Board of Directors is responsible for that the corporate governance statement on pages 39-47 has been prepared in accordance with the Annual Accounts Act.
Our examination of the corporate governance statement is conducted in accordance with FAR's auditing standard RevU 16 The auditor's examination of the corporate governance statement. This means that our examination of the corporate governance statement is different and substantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that the examination has provided us with sufficient basis for our opinions.
A corporate governance statement has been prepared. Disclosures in accordance with chapter 6 section 6 the second paragraph points 2-6 of the Annual Accounts Act and chapter 7 section 31 the second paragraph the same law are consistent with the other parts of the annual accounts and consolidated accounts and are in accordance with the Annual Accounts Act.
Stockholm, 27 March 2017 PricewaterhouseCoopers AB
Lennart Danielsson Authorised Public Accountant
The tables below present financial information in summary for the financial years 2012-2016. For all years presented, the income statement and certain key indicators were recalculated considering the discontinuation of the store operations in Denmark. Balance sheets and cash flows have not been recalculated.
| Income statements, SEK M | 2016 | 2015 | 2014 | 2013 | 2012 |
|---|---|---|---|---|---|
| Continuing operations: | |||||
| Net sales | 5,786 | 5,624 | 5,262 | 5,129 | 4,591 |
| Other revenue | 151 | 137 | 128 | 122 | 133 |
| Goods for resale | -2,686 | -2,529 | -2,337 | -2,275 | -2,015 |
| Other operating expenses | -2,595 | -2,449 | -2,229 | -2,226 | -2,010 |
| EBITDA | 656 | 784 | 824 | 750 | 699 |
| Depreciation and impairment of tangible fixed assets | -62 | -57 | -61 | -67 | -60 |
| EBITA | 594 | 726 | 763 | 683 | 639 |
| Amortisation and impairment of intangible fixed assets | -113 | -110 | -124 | -156 | -73 |
| Operating profit, EBIT | 481 | 616 | 639 | 527 | 566 |
| Net financial items | -35 | -22 | -19 | -39 | -55 |
| Profit after financial items | 446 | 594 | 620 | 489 | 511 |
| Tax on profit for the year | -105 | -164 | -153 | -129 | -101 |
| Profit for the year from continuing operations | 342 | 430 | 466 | 360 | 410 |
| Discontinued operations: | |||||
| Profit for the year from discontinued operations1) | 0 | 0 | -340 | -44 | -28 |
| Profit for the year | 342 | 430 | 127 | 315 | 382 |
| 31 Dec. | 31 Dec. | 31 Dec. | 31 Dec. | 31 Dec. | |
|---|---|---|---|---|---|
| Balance sheets, SEK M | 2016 | 2015 | 2014 | 2013 | 2012 |
| Assets | |||||
| Intangible fixed assets | 2,757 | 2,734 | 2,813 | 2,881 | 3,086 |
| Other fixed assets | 304 | 288 | 321 | 347 | 381 |
| Inventories | 1,279 | 1,226 | 1,223 | 1,213 | 1,203 |
| Accounts receivable | 485 | 453 | 450 | 439 | 495 |
| Other current assets | 336 | 365 | 319 | 285 | 302 |
| Cash and cash equivalents | 291 | 295 | 258 | 279 | 241 |
| Total assets | 5,452 | 5,361 | 5,384 | 5,444 | 5,708 |
| Shareholders' equity and liabilities | |||||
| Shareholders' equity, Parent Company's shareholders | 2,311 | 2,143 | 2,066 | 2,228 | 2,303 |
| Non-controlling interests | 14 | 12 | 14 | 12 | 13 |
| Long-term liabilities | 1,524 | 1,645 | 1,575 | 1,872 | 2,059 |
| Current liabilities | 1,603 | 1,560 | 1,728 | 1,332 | 1,333 |
| Total shareholders' equity and liabilities | 5,452 | 5,361 | 5,384 | 5,444 | 5,708 |
| Condensed cash-flow statement, SEK M | 2016 | 2015 | 2014 | 2013 | 2012 |
|---|---|---|---|---|---|
| Cash flow from operating activities | 544 | 439 | 413 | 557 | 518 |
| Cash flow from investing activities | -94 | -146 | -121 | -54 | -1,510 |
| Cash flow from financing activities | -466 | -245 | -309 | -442 | 1,165 |
| Cash flow for the year | -16 | 48 | -17 | 61 | 173 |
| Data per share2), amounts in SEK per share unless otherwise stated | 2016 | 2015 | 2014 | 2013 | 2012 |
|---|---|---|---|---|---|
| Earnings, continuing operations | 9.32 | 11.77 | 12.80 | 9.81 | 11.57 |
| Earnings, discontinued operations | 0.00 | 0.00 | -9.46 | -1.25 | -0.76 |
| Earnings | 9.32 | 11.77 | 3.34 | 8.56 | 10.80 |
| Cash flow | 15.1 | 12.2 | 11.5 | 15.5 | 14.9 |
| Shareholders' equity | 64.4 | 59.7 | 57.5 | 62.1 | 64.2 |
| Dividend3) | 7.00 | 7.00 | 7.00 | 7.00 | 7.00 |
| Share of profit paid, % | 75 | 59 | 210 | 82 | 65 |
| Share price at year-end | 171.5 | 173.0 | 204.0 | 198.0 | 206.5 |
| Share price, highest for the year | 207.0 | 234.5 | 207.0 | 233.0 | 246.0 |
| Share price, lowest for the year | 150.5 | 170.0 | 139.0 | 189.0 | 180.0 |
| Direct yield, % | 4.1 | 4.0 | 3.4 | 3.5 | 3.4 |
| P/E ratio at year-end, multiple | 18.4 | 14.7 | 61.1 | 23.1 | 19.1 |
| Average number of shares after dilution effects4) | 35,901,487 | 35,901,487 | 35,901,487 | 35,901,487 | 34,695,410 |
| Number of shares at end of period | 35,901,487 | 35,901,487 | 35,901,487 | 35,901,487 | 35,901,487 |
| Number of shareholders at year-end | 9,484 | 9,373 | 9,664 | 8,355 | 8,138 |
1) The discontinued store operations in Denmark are presented as discontinued operations as of 1 January 2015. For additional information regarding discontinued operations, refer to Note 34.
2) For information on financial definitions, refer to page 89.
3) The Board's proposal for 2016. 4) No dilution is applicable.
| Key figures1)2) | 2016 | 2015 | 2014 | 2013 | 2012 |
|---|---|---|---|---|---|
| Sales growth, % | 3 | 7 | 3 | 12 | 36 |
| Gross margin, % | 54 | 55 | 56 | 56 | 56 |
| EBITDA margin, % | 11 | 14 | 15 | 14 | 15 |
| EBITA margin, % | 10 | 13 | 14 | 13 | 14 |
| EBIT margin, % | 8 | 11 | 12 | 10 | 12 |
| Capital employed, SEK M | 4,066 | 4,086 | 3,980 | 4,176 | 4,432 |
| Return on capital employed, % | 12 | 15 | 16 | 13 | 16 |
| Return on shareholders' equity, % | 15 | 20 | 21 | 16 | 21 |
| Return on total capital, % | 9 | 12 | 12 | 10 | 12 |
| Equity/assets ratio, % | |||||
| Net debt/equity ratio, multiple | 43 | 40 | 39 | 41 | 41 |
| Interest-coverage ratio, multiple | 0.6 | 0.8 | 0.8 | 0.7 | 0.8 |
| Net debt, SEK M | 17 | 19 | 16 | 11 | 12 |
| Net debt/EBITDA, multiple3) | 1,437 | 1,626 | 1,629 | 1,642 | 1,849 |
| 2.19 | 2.07 | 3.09 | 2.32 | 2.74 | |
| Average number of employees4) | |||||
| Sweden | 1,413 | 1,438 | 1,335 | 1,342 | 1,287 |
| Norway | 808 | 794 | 772 | 775 | 690 |
| Other countries | 66 | 58 | 24 | 21 | 24 |
| Group | 2,287 | 2,290 | 2,131 | 2,138 | 2,001 |
| Number of stores/of which proprietary4) | |||||
| Mekonomen Sweden | 132/112 | 134/113 | 137/113 | 137/109 | 143/115 |
| Mekonomen Norway | 45/32 | 45/32 | 46/33 | 47/32 | 51/35 |
| Sørensen og Balchen – Norway | 72/37 | 70/35 | 71/34 | 74/34 | 78/36 |
| MECA Sweden | 61/51 | 61/48 | 63/48 | 61/44 | 64/43 |
| MECA Norway | 24/24 | 24/24 | 24/24 | 25/24 | 25/24 |
| Total MECA | 85/75 | 85/72 | 87/72 | 86/68 | 89/67 |
| Other | 8/5 | 8/5 | 10/6 | 10/6 | 11/7 |
| Group | 342/261 | 342/257 | 351/258 | 354/249 | 372/260 |
| Number of Mekonomen Service Centres | |||||
| Sweden5) | |||||
| Norway | 447 | 457 | 485 | 489 | 484 |
| Denmark6) | 339 | 345 | 378 | 384 | 387 |
| Finland | 0 | 102 | 195 | 212 | 219 |
| Group | 23 809 |
19 923 |
17 1,075 |
12 1,097 |
4 1,094 |
| Number of MekoPartner workshops | |||||
| Sweden | 127 | 125 | 129 | 116 | 137 |
| Norway | 93 | 97 | 73 | 72 | 73 |
| Denmark6) | 0 | 39 | 153 | 190 | 216 |
| Group | 220 | 261 | 355 | 378 | 426 |
| Number of BilXtra workshops | |||||
| Norway | 255 | 246 | 232 | 243 | 225 |
| Group | 255 | 246 | 232 | 243 | 225 |
| Number of Speedy workshops | |||||
| Sweden | |||||
| Group | 26 26 |
20 20 |
14 14 |
12 12 |
11 11 |
| Number of Meca Car Service workshops | |||||
| Sweden | 425 | 404 | 377 | 344 | 334 |
| Norway | 286 | 272 | 251 | 226 | 212 |
| Group Total number of affiliated workshops in the Group |
711 2,021 |
676 2,126 |
628 2,304 |
570 2,300 |
546 2,302 |
1) The key figures refer to continuing operations. Comparative figures have been recalculated. The balance sheet has not been recalculated for discontinued operations. For additional information regarding discontinued operations, refer to Note 34.
2) For information on financial definitions, refer to page 89.
3) In the calculation of the key figure Net debt/EBITDA, discontinued operations were included.
4) The number of employees and numbers of stores are reported excluding the discontinued store operations in Denmark.
5) Includes 20 (18) proprietary workshops in Meko Service Nordic.
6) As of 28 December 2016, the workshops in Denmark are not included in the MECA segment as the Danish export operations were divested as of this date.
| 2016 | 2015 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Continuing operations, SEK M | Full year |
Q4 | Q3 | Q2 | Q1 | Full year |
Q4 | Q3 | Q2 | Q1 |
| Net sales1) | ||||||||||
| MECA2) | ||||||||||
| Mekonomen Sweden3) | 2,039 | 528 | 477 | 534 | 500 | 1,871 | 489 | 466 | 473 | 444 |
| 1,891 | 470 | 456 | 503 | 462 | 1,925 | 493 | 468 | 515 | 449 | |
| Mekonomen Norway4) | 836 | 210 | 209 | 223 | 194 | 814 | 191 | 195 | 224 | 204 |
| Sørensen og Balchen | 725 | 182 | 179 | 192 | 172 | 729 | 159 | 179 | 201 | 191 |
| Other segments5) | 295 | 76 | 71 | 85 | 63 | 285 | 83 | 66 | 77 | 60 |
| Group | 5,786 | 1,466 | 1,392 | 1,537 | 1,391 | 5,624 | 1,415 | 1,374 | 1,489 | 1,346 |
| EBITA | ||||||||||
| MECA2) | 217 | 16 | 53 | 85 | 62 | 258 | 52 | 54 | 80 | 71 |
| Mekonomen Sweden3) | 190 | 42 | 56 | 40 | 53 | 289 | 53 | 78 | 92 | 65 |
| Mekonomen Norway4) | 132 | 28 | 35 | 42 | 27 | 151 | 25 | 39 | 51 | 36 |
| Sørensen og Balchen | 117 | 29 | 29 | 36 | 24 | 117 | 26 | 30 | 35 | 25 |
| Other segments5) | -63 | -11 | -20 | -15 | -17 | -87 | -20 | -5 | -35 | -28 |
| Group | 594 | 103 | 154 | 189 | 149 | 726 | 138 | 196 | 224 | 169 |
| EBIT | ||||||||||
| MECA2) | 205 | 13 | 50 | 82 | 60 | 245 | 49 | 51 | 77 | 68 |
| Mekonomen Sweden3) | 187 | 40 | 55 | 39 | 52 | 287 | 53 | 77 | 92 | 65 |
| Mekonomen Norway4) | 132 | 28 | 35 | 42 | 27 | 151 | 25 | 39 | 51 | 35 |
| Sørensen og Balchen | 117 | 29 | 29 | 36 | 24 | 116 | 26 | 30 | 35 | 25 |
| Other segments5) | -84 | -16 | -25 | -19 | -23 | -106 | -26 | -9 | -39 | -32 |
| Other items6) | -77 | -19 | -19 | -19 | -19 | -77 | -19 | -19 | -19 | -19 |
| Group | 481 | 74 | 125 | 161 | 121 | 616 | 109 | 168 | 197 | 142 |
| Investments7) | ||||||||||
| MECA2) | 16 | 6 | 3 | 4 | 3 | 17 | 5 | 2 | 2 | 8 |
| Mekonomen Sweden3) | 30 | 14 | 5 | 5 | 6 | 29 | 12 | 2 | 6 | 9 |
| Mekonomen Norway4) | 3 | 1 | 0 | 1 | 1 | 4 | 1 | 1 | 1 | 1 |
| Sørensen og Balchen | 5 | 2 | 1 | 1 | 1 | 3 | 1 | 0 | 1 | 1 |
| Other segments5) | 57 | 21 | 11 | 18 | 8 | 50 | 14 | 14 | 14 | 8 |
| Group | 111 | 43 | 20 | 28 | 20 | 103 | 33 | 19 | 24 | 28 |
| EBITA margin, % | ||||||||||
| MECA2) | 10 | 3 | 11 | 16 | 12 | 14 | 11 | 12 | 17 | 16 |
| Mekonomen Sweden3) | 10 | 8 | 12 | 8 | 11 | 14 | 10 | 16 | 17 | 14 |
| Mekonomen Norway4) | 15 | 13 | 16 | 18 | 14 | 18 | 13 | 19 | 22 | 17 |
| Sørensen og Balchen | 16 | 16 | 16 | 18 | 14 | 16 | 16 | 16 | 17 | 13 |
| Group | 10 | 7 | 11 | 12 | 10 | 13 | 10 | 14 | 15 | 12 |
| EBIT margin, % | ||||||||||
| MECA2) | ||||||||||
| Mekonomen Sweden3) | 10 | 2 | 10 | 15 | 12 | 13 | 10 | 11 | 16 | 15 |
| Mekonomen Norway4) | 10 | 8 | 12 | 8 | 11 | 14 | 10 | 16 | 17 | 14 |
| 15 | 13 | 16 | 18 | 14 | 18 | 13 | 19 | 22 | 17 | |
| Sørensen og Balchen | 16 | 16 | 16 | 18 | 13 | 16 | 16 | 16 | 17 | 13 |
| Group | 8 | 5 | 9 | 10 | 9 | 11 | 8 | 12 | 13 | 10 |
| Quarterly data, Group8) | ||||||||||
| Total revenue | 5,937 | 1,508 | 1,432 | 1,573 | 1,424 | 5,761 | 1,447 | 1,405 | 1,527 | 1,382 |
| EBITA | 594 | 103 | 154 | 189 | 149 | 726 | 138 | 196 | 224 | 169 |
| EBIT | 481 | 74 | 125 | 161 | 121 | 616 | 109 | 168 | 197 | 142 |
| Net financial items | -35 | -2 | -13 | -9 | -11 | -22 | 0 | -15 | -9 | 2 |
| Profit after financial items | 446 | 72 | 112 | 152 | 110 | 594 | 109 | 154 | 188 | 144 |
| Tax | -105 | -6 | -31 | -40 | -27 | -164 | -32 | -42 | -50 | -39 |
| Profit/loss for the period | ||||||||||
| Gross margin, % | 342 | 66 | 82 | 112 | 83 | 430 | 76 | 111 | 138 | 105 |
| EBITA margin, % | 54 | 52 | 54 | 54 | 54 | 55 | 54 | 56 | 55 | 55 |
| EBIT margin, % | 10 | 7 | 11 | 12 | 10 | 13 | 10 | 14 | 15 | 12 |
| Earnings per share, continuing operations, SEK | 8 | 5 | 9 | 10 | 9 | 11 | 8 | 12 | 13 | 10 |
| 9.32 | 1.83 | 2.20 | 3.02 | 2.28 | 11.77 | 2.14 | 3.01 | 3.74 | 2.88 | |
| Earnings per share, discontinued operations, SEK | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.03 | 0.00 | -0.02 | -0.01 |
| Earnings per share, SEK | 9.32 | 1.83 | 2.20 | 3.02 | 2.28 | 11.77 | 2.17 | 3.01 | 3.72 | 2.87 |
| Shareholders' equity per share, SEK | 64.4 | 64.4 | 63.0 | 59.3 | 62.5 | 59.7 | 59.7 | 58.4 | 56.9 | 61.0 |
| Cash flow per share, SEK | 15.1 | 5.8 | 2.2 | 6.4 | 0.8 | 12.2 | 5.4 | 4.3 | 3.8 | -1.3 |
| Return on shareholders' equity, % | 15.1 | 15.1 | 15.9 | 17.6 | 18.7 | 20.0 | 20.0 | 20.9 | 21.9 | 21.3 |
1) Net sales for each segment are from external customers.
2) As of 1 January 2015, store operations in Denmark are presented as discontinued operations and therefore are not included in the MECA segment. For additional information regarding discontinued operations, refer to Note 34.
3) The Mekonomen Sweden segment primarily includes wholesale, store and fleet operations in Sweden. Mekonomen Sweden was previously included in the Mekonomen Nordic segment. For additional information
regarding the new segment breakdown, refer to Note 3 Segment information. 4) The Mekonomen Norway segment primarily includes store and fleet operations in Norway. Mekonomen Norway was previously included in the Mekonomen Nordic segment. For additional information regarding the new segment breakdown, refer to Note 3 Segment information.
5) "Other segments" include business activities and operating segments for which information is not provided separately. "Other segments" also include units that were previously included in Mekonomen Nordic, but are not included in Mekonomen Sweden or Mekonomen Norway; the comparative figures have been recalculated. For additional information regarding the new segment breakdown, refer to Note 3 Segment information.
6) "Other items" include acquisition-related items attributable to Mekonomen AB's direct acquisitions. Current acquisition-related items are amortisation of acquired intangible assets related to the acquisitions of MECA and Sørensen og Balchen.
7) Investments do not include company and business combinations.
8) All amounts and key figures refer to the continuing operations except cash flow. For information on financial definitions, refer to page 89.
Total assets less non-interest-bearing liabilities and provisions including deferred tax liabilities.
Cash flow from operating activities in relation to the average number of shares. Average number of shares is calculated as the average number of shares at the end of the period multiplied by the number of days that this number existed during the period plus any other number of shares during the period multiplied by the number of days that this or these numbers existed during the period, with the total divided by number of days during the period.
Profit for the period excluding non-controlling interests, in relation to the average number of shares. Average number of shares is calculated as the average number of shares at the end of the period multiplied by the number of days that this number existed during the period plus any other number of shares during the period multiplied by the number of days that this or these numbers existed during the period, with the total divided by number of days during the period.
EBIT after depreciation/amortisation as a percentage of total revenue.
EBITA after depreciation according to plan but before amortisation and impairment of intangible fixed assets.
EBITA as a percentage of total revenue.
EBIT before depreciation/amortisation and impairment of tangible and intangible fixed assets.
EBITDA as a percentage of total revenue.
Shareholders' equity including non-controlling interest as a percentage of total assets.
Gross margin Net sales less costs for goods for resale, as a percentage
of net sales.
Revenue less costs for goods for resale.
Profit after net financial items plus interest expenses divided by interest expenses.
Current and long-term interest-bearing liabilities for borrowing, meaning excluding pensions, leasing, derivatives and similar obligations, less cash and cash equivalents.
Net debt divided by shareholders' equity including non-controlling interest.
Operating costs consists of other external costs, personnel expenses and depreciation/amortisation and impairment of tangible and intangible fixed assets.
Profit for the period, excluding non-controlling interests, as a percentage of average shareholders' equity attributable to Parent Company's shareholders. Average shareholders' equity attributable to Parent Company's shareholders is calculated as shareholders' equity attributable to Parent Company's shareholders at the end of the period plus the shareholders' equity for the four immediately preceding quarters attributable to the Parent Company's shareholders at the end of the period divided by five.
Profit after net financial items plus interest expenses as a percentage of average capital employed. Average capital employed is calculated as capital employed at the end of the period plus the capital employed for the four immediately preceding quarters divided by five.
Profit after net financial items plus interest expenses as a percentage of average total assets. Average total assets is calculated as total assets at the end of the period plus the total assets for the four immediately preceding quarters at the end of the period divided by five.
Increase in the total revenue as a percentage of the total revenue of the previous year.
Shareholders' equity excluding non-controlling interests,
Sales relative to the average number of employees.
in relation to the number of shares at the end of the period.
Products that are not necessary for a car to function, but enhance the experience or extend use of the car, for example, car-care products, roof boxes, car child seats, etc.
Workshops that are not proprietary owned, but conduct business under the Group's brands/workshop concepts (Mekonomen Service Centre, MekoPartner, MECA Car Service, BilXtra and Speedy).
Sales of goods and services between companies (business-to-business).
Sales of goods and services between companies and consumers (business-to-consumer).
Stores, majority-owned workshops and Internet sales that have been in operation for the past 12 month period and throughout the entire preceding comparative period.
Impact of currency with respect to realised and unrealised revaluation of foreign current non-interest-bearing receivables and liabilities.
Impact of currency with respect to internal sales from Mekonomen Grossist AB, as well as from MECA Car Parts AB to each country.
Impact of currency from translation of earnings from foreign subsidiaries to SEK.
Mekonomen Group's offering to business customers comprising service and repairs of cars, sales of spare parts, tyres and accessories and tyre storage.
The MECA, Mekonomen Sweden, Mekonomen Norway and Sørensen og Balchen segments.
The car portal that Mekonomen Group owns together with industry players that simplifies the workshop selection and booking processes for car owners.
Mekonomen's cutting-edge concept that meets the customers' growing demands for quality, availability and comfort, with an extended range of services and complete solutions.
Own brand products, such as Mekonomen Group's own brand products ProMeister and Carwise.
Stores that are not proprietary, but conduct business under the Group's brands/store concepts.
Mekonomen Group's proprietary brand for high quality spare parts with five-year warranties.
Stores with operations in subsidiaries, directly or indirectly majority owned, by Mekonomen AB.
Workshops with operations in subsidiaries, directly or indirectly majority owned, by Mekonomen AB.
Sales in comparable units comprise external sales (in local currency) in majority-owned stores, wholesale sales to partner stores, external sales in majority-owned workshops and Internet sales.
Sales to affiliated workshops and sales to proprietary workshops.
Cash sales from proprietary stores to customer groups other than affiliated workshops and other workshops, as well as the Group's e-commerce sales to consumers.
Sales to company customers that are not affiliated to any of Mekonomen Group's concepts, including sales in the fleet operations.
Underlying net sales
Sales adjusted for the number of comparable working days and currency effects.
As of the January-June 2016 interim report, Mekonomen applies the new guidelines for alternative performance figures issued by ESMA1). An alternative performance measure is a financial measure over historical or future earnings trends, financial position or cash flow that are not defined or specified in IFRS. Mekonomen believes that these measures provide valuable supplemental information to the company's management, investors and other stakeholders to evaluate the company's performance. The alternative performance measures are not always comparable with measures used by other companies since not all companies calculate these measures in the same way. They shall thereby be seen as a complement to measures defined according to IFRS. For relevant reconciliations of the alternative performance measures that cannot be directly read or derived from the financial statements, refer to mekonomen.com.
Postal address: Box 19542 SE-104 32 Stockholm, Sweden
Visiting address: Solnavägen 4, 10th floor, Stockholm, Sweden Tel: +46 8 464 00 00 E-mail: [email protected] www.mekonomen.com
Postal address: Box 9225 SE-200 39 Malmö, Sweden
Visiting address: Stenåldersgatan 27, Malmö, Sweden Tel: +46 40 671 60 60 E-mail: [email protected] www.meca.se
Postal address: Box 19542 SE-104 32 Stockholm, Sweden
Visiting address: Solnavägen 4, 10th floor, Stockholm, Sweden Tel: +46 8 464 00 00 E-mail: [email protected] www.mekonomen.se
Postal address: Postboks 524 Bedriftsenteret NO-1411 Kolbotn, Norway
Visiting address: Rosenholmveien 25, NO-1414 Trollåsen, Norway Tel: +47 66 81 76 90 E-mail: [email protected] www.mekonomen.no
Postal address: Postboks 134 Holmlia NO-1203 Oslo, Norway
Visiting address: Rosenholmveien 12, NO-1252 Oslo, Norway Tel: +47 22 76 44 00 E-mail: [email protected] www.sogb.no
Mekonomen Group's 2016 Annual Report was produced by Mekonomen Group in cooperation with Narva. Print: Göteborgstryckeriet, Mölndal, 2017.
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